Friday, July 22, 2011

Universities and the Innovation Marketplace

By Keith McDowell

 “Where’s the beef?” The angry, irascible cry of actress Clara Peller in 1984 – 1985 commercials for Wendy’s burger chain became an iconic slogan of the 1980’s and even penetrated into the Democratic primaries as Vice President Walter Mondale challenged Senator Gary Hart with the same cry. In many ways it established the power of commercials to affect a competitive advantage, although most people fail to recall that Wendy’s burgers were the product. Americans have a love-hate relationship with commercials. Many watch the Super Bowl, not for the football, but to be entertained by the real contest: who will win the commercial shootout?

The commercial marketplace is a phenomenon that we all experience with commercials, obnoxious or not, used as a marketing tool to achieve sales and wealth creation through the buying and selling of products and services. Innovation drives a significant portion of the economy created by that marketplace and is often called the innovation economy. But innovations drive not only the commercial marketplace, but are bought and sold in a marketplace known as the innovation marketplace.

While in many ways an old and established enterprise, the innovation marketplace has undergone a significant transformation in the past decade as a result of many factors including the advent of the information technology age, global competition coupled with Friedman’s “flat earth” hypothesis, and the availability of investment dollars. It is not my intent herein to examine this transformation, but to accept its existence and to examine the role to be played by universities and to focus my analysis from that perspective.

What is the innovation marketplace? In very simplistic terms and as a starting definition, it’s the enterprise of buying and selling innovations packaged as intellectual property (IP) in order to provide a competitive advantage to the buyer and assurance of a return on investment for the seller. In other words, the buyer owns the rights to commercialize the IP, makes money from using those rights, and pays the seller through a number of vehicles including stock in the company, royalty payments, up-front buyouts or monetization, and many other mechanisms. Ultimately, of course, the commercial marketplace is the real source of the dollars that create value and increase wealth.

Who are the sellers? Who are the buyers? For the most part the sellers include universities, federal laboratories, FFRDCs, industry, non-profits, and independent garage inventors. Although industry expends 72.71% of the R&D dollars in the United States as of FY2008 and likely generates the bulk of the innovations, most such innovations are proprietary and not sold in the innovation marketplace. The buyers include angel investors, venture capitalists, entrepreneurs, management teams, industry – especially startup companies, and government. Sometimes faculty members acting as independent agents are buyers. Unfortunately, patent trolls who buy up and bundle patents or attempt to control specific sectors have also emerged as a significant issue.

The innovation marketplace is a vital and growing global enterprise enhanced by the Internet and fueled by experimentation with a number of new tools. For example, the past decade has seen the introduction of IP web hosts, both private and public sponsored. IP web hosts post available IP and serve as a clearinghouse. Some of the most prominent private ones with their web links are as follows:

·      Flintbox,
·      Foliodirect,
·      iBridge,
·      Inngot,
·      Innovaro,
·      Knowledge Express,
·      Pharma-Transfer,
·      Proir IP
·      Tech Transfer Online,
·      Technology Market (APCTT),
·      Tynax,

Government at all levels has also begun to set up such Internet IP clearinghouses. For example, the State of New Jersey has created the Patent Bank “to help new technologies find their way to commercial market.” At the Federal level, the U.S. Department of Commerce through NIST has created the USA National Innovation Marketplace. The U.S. Department of Energy sponsors the Energy Innovation Portal. Sadly, only one of these web clearinghouses, private or public, reported any statistics on their usage or success rates. The NIST site claims that “1 in 5 innovations on the USA National Innovation Marketplace get a serious meeting with a buyer or investor.”

Universities have also joined the fray by creating Internet catalogues to hawk their IP, available technologies, or expertise. Here are a few examples with URLs:

·      Available technologies, The University of Texas at Austin,
·      The Collaborative Partnership, The University of Texas at Arlington,
·      Available technologies, University of California Technology Transfer,
·      MIT Technology Licensing Office,
·      University of Maryland,
·      University of North Carolina,

Purdue University, Indiana University, Ball State University, and the University of Notre Dame have combined forces in a project called The Indiana Database of Research of University Expertise (INDURE) as an example of an expertise site.

Another venue for the innovation marketplace equivalent to trade shows is the technology showcase. Prominent examples include the annual Worlds Best Technologies Showcase and the annual Bio International Convention. Local events are too numerous to enumerate.

For universities, the central player in the innovation marketplace is the technology transfer office (TTO), often now called the office of technology commercialization (OTC) to encompass the expansion of its role over the past decade. It’s a simple fact that most of the transfer of university IP or technology, especially for the quality IP, occurs as a result of the TTO engaging in direct marketing of its IP or available technology, often to local entrepreneurs or startup companies. In that sense, it’s a relational-network driven marketplace.

Universities are also experimenting with outsourcing some, if not all, of their “sales” through companies such as Intellectual Ventures and Allied Minds. In the past, the Alfred Mann Foundation has created Alfred E. Mann Institutes on university campuses to foster, mentor, and carry out transfer of biotechnology innovations from the laboratory to the commercial marketplace.

Do universities engage in marketing and have a marketing strategy? The simple answer is yes. Even without an articulated strategy, universities transfer (sell) IP to other entities (buyers). I’ve addressed licensing strategies for TTOs elsewhere. Here I’m referring to a “market” strategy. For example, universities host booths at the Bio International Convention where both their intellectual property and their innovation capacity and capability are on display. Slogans adorn the booths with the intent of branding. Computers show glitzy video productions on demand.  Branded trinkets are handed out. It’s marketing, pure and simple. But do they have a strategy? Should they use one of the IP web host such as iBridge? Surprisingly, marketing is one of the most important functions of TTOs, but probably the function least developed at universities and often not well understood. Certainly marketing in the innovation marketplace is a fact of life and one to be addressed.

Do normal market rules apply in the innovation marketplace? Tough question! Others will have to decide, but I think we don’t yet understand the innovation marketplace sufficiently to fully answer the question. We need better data. We need more analysis. One thing is certain; the innovation marketplace is real and rapidly expanding. Any university or TTO that doesn’t engage marketing and develop a brand is going to miss out on a major happening. Most important, the innovation marketplace and its economy are essential for America to maintain its dominance in global competition, especially through the formation of regional innovation ecosystems. Our national policies must be cognizant of this important marketplace.

Does any of this new activity in the historical innovation marketplace actually work to accelerate discovery to deployment in the commercial marketplace? I think the jury is still out. For example, there are indications that posting intellectual property on the web, no matter the specific mechanism, doesn’t really work. It’s the Maytag repairman sitting and waiting for the phone to ring. Krisztina Holly surveyed the venture capital community and reported that “In our research, the opinion was unanimous among VCs that their preferred source of deals is a trusted person in the network – not showcases, over-the-transom business plans, or bulletins.” Zusha Elinson in a story of 17 June 2009 reports that “observers say the dot-com-esque rise and fall of the Ocean Tomo auction business – selling for less than its 2008 revenue – is a sign, in part, of a business model that may have run its course.”

The innovation marketplace and the economy it produces in the commercial marketplace have always been with us and are not going away.  But the transformation of and changes to the innovation marketplace of the past decade are still in the shakeout phase and some patience is required as it morphs into a globally competitive marketplace. That requires a complete unmasking of what is and what is not and a healthy dose of innovation in the marketplace itself. Such analysis and such experiments are underway. Let the fun continue!

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