Pilkington self-cleaning glass
As companies refine their organisations to focus on what they do best, the question of whether to make or buy research breakthroughs is coming sharply into focus. A widening technology frontier and the increasing importance of working at the interface between disciplines is pushing companies to consider new ways to access the research they need. Luke Collins finds out how to acquire technology and listens to the experiences of two companies who already do so.
Open innovation is built not just on what you have, but on what others have as well. So the job of a successful R&D manager is becoming “to manage know-how and know-who”, according to Jan Maat, external research manager for Unilever, and a member of an EIRMA working group on technology access for open innovation.
The working group has found that time-to-market pressures are forcing companies to rethink their businesses so they can react more quickly. Information technology is compressing time and distance. Competition regulations are changing the types of partnerships that are allowed. Company structures and even employment expectations are evolving.
“In Unilever that means that we have moved from controlling everything from the plantation to the margarine in the tub, to focusing on fast-moving consumer goods,” Maat said.
The corporate environment is changing too, as companies integrate R&D with their business functions, and consider using corporate venturing to back technology developments. Universities are changing their attitudes to intellectual property (IP) rights and beginning to participate in global innovation networks. The role of start-ups, as more flexible and creative players in the landscape, is being more widely recognised. And new sources of technology, including brokers and the Chinese and Indian economies, are emerging.
In such a landscape, any company needs to understand what it is, what it does and what it wants to become. Then it is vital to understand who the customers are, which may not be as obvious as it seems. Once the context has been sorted out, companies need to know what technologies they have to hand internally and what technologies are available elsewhere. It’s then possible to develop a structured approach to deciding whether to make, buy or ally to access a new technology.
If you decide to acquire a technology, it’s sensible to identify how far the technology is along the innovation process, so you can estimate the time and resources it will take to exploit the acquisition and how best to manage its development. It makes little sense to acquire an early-stage technology if you need it to enable a process in the next six months. Conversely, it doesn’t make sense to acquire a technology that is close to market if you’re trying to build a portfolio of long-term technology options.
Making decisions about acquiring technology may prompt companies to make decisions about divesting themselves of internally developed technology. If they have technologies in development with limited applicability to the core business it may make sense to divest them, so the resources can be better spent on acquiring or developing technologies vital to your core activities.
Of course, none of this can work unless the organisation has the functional skills and cultural values that can handle technology acquisition and divestment.
“You need to have an organisation aligned to absorb technology,” Maat said.
If a company wants to acquire technology, it needs to know who has it and how good it is. This takes rich internal and external contact networks. Proctor & Gamble, for example, has different approaches for finding technical, commercial and consumer ideas. Companies then need rigorous evaluation procedures to check the value of a target technology, once it has been identified.
Unilever has a couple of special techniques to access early-stage technology. It has formed Unilever Technology Ventures in Santa Clara, California, as a source of new technologies and potential spin-ins. Its strategy is to invest small sums, of up to $2.5m, in early-stage ventures that have got beyond their seed funding round, preferably as a co-investor with other partners.
Unilever is also involved with Technological Top Institutes in The Netherlands as a way of accessing early-stage technologies. It is involved in the Wageningen Centre for Food Sciences, an alliance of industry and research organisations to strengthen the Dutch food industry through innovative technology. The Institute was founded 1997 and now employs 120, drawn from companies such as Unilever, DSM and CSM, and publicly funded organisations such as Maastricht University.
Such alliances have their issues.
“It is not easy to sit with former enemies, but you have to learn that you have to share,” said Maat. And there are wider benefits, too. “By doing it on a large scale with government funding you get more than your money’s worth.”
He estimates that a €1m investment delivers between €10m and €15m of output value.
Maat stresses that acquiring a technology is a professional process that needs to be handled correctly.
“You must have a professional negotiating strategy,” he said. “We let [a target] university and our scientists work on the program, but all other elements are handled professionally. Technology transfer is a business process and therefore you need a multifunctional team to handle it.”
EIRMA has been involved in extensive work to smooth the path for companies wanting to work with universities and other public research organisations (PROs). Many companies are now making long-term strategic partnerships with such organisations, or short-term tactical arrangements to access a key technology.
Governments are also keen to see greater use made of university research, and are encouraging companies to move beyond the traditional forms of partnership to also consider collaborations, licensing and spin-outs. Unfortunately, licence and royalty deals are becoming more difficult to do as publicly funded research organisations try to protect their intellectual property (IP). America’s Bayh-Dole act, for example, gave universities the power and responsibility to deal with their own IP. Although this got the government out of the loop, it has led to more lengthy and difficult negotiations with higher transaction costs. Many of these agreements bring little direct benefit to the universities involved: the licence agreements often cost more to set up than they yield in fees.
Universities are full of clever people who are good at developing new knowledge that others could use. However, the knowledge transfer process demands proper management to be successful. Some universities have learnt this the hard way and now have professionalised their technology transfer organisations.
ISIS Innovation was set up by Oxford University to advertise the university’s IP to industry and then find ways of making it available to them for a fair return. Before ISIS was formed, Oxford was doing one spin-out every four years. It now does eight a year. There are various reasons for this success: the strength of the research on offer and of the IP policy protecting it; a commercially aware university administration; and continuing investment in technology transfer staff. ISIS also exists within a supportive ecosystem that also includes the Oxford Science Enterprise Centre, two science parks, a venture capital community and professional services.
“Many governments today are looking for ways to improve the effectiveness of science-industry linkages. The wrong approach is to legislate to make technology transfer happen,” said Andrew Dearing, secretary general of EIRMA. “If we want to valorise public research, we need to know what we are trying to value and for whose benefit, so that everyone has the right incentives to make the system work.”
Andrew Herbert is managing director of Microsoft Research (MSR) Cambridge, one of six labs the software giant has around the globe. The lab studies operating systems and networks, machine learning and perception, programming principles and tools, and computer-mediated living. But even such a big company now recognises it needs external ideas and help.
“Eight years ago Microsoft thought it could do all its own research,” said Herbert. “Our external relationships were commercial and our academic relationships were about trying to get them to use Windows.”
Now he is looking for collaborations that can feed technology into the company’s product groups, or which would create external business opportunities that increase the overall use of computing, a long-term advantage for Microsoft.
MSR Cambridge uses two broad forms of collaboration: internal collaborations, usually with academics, with the aim of creating intellectual property (IP) that can be used by Microsoft or licensed out; and externally supported collaborations that create business opportunities and expand the use of Microsoft products.
One of MSR Cambridge’s internal collaborations is with INRIA, the French national institute for research into computing.
“Having a relationship with INRIA, you very quickly form relationships with the rest of French computing research,” said Herbert.
Another internal research collaboration, this time with NTL:Broadcast to use terrestrial digital radio and TV channels for data broadcasting, had a similar side benefit. Building the infrastructure needed to develop that project created a testbed for further work.
Herbert says this sort of collaboration has other benefits. It’s good for recruiting, since professors go to MSR as consultants and then want to become visiting scientists. The professors send their PhD candidates, who may then become associates on two-year post-doctoral research fellowships. Academics also have an important role in shaping public perceptions and informing government policy.
But it’s not all roses. These collaborations can often end in entangled IP positions.
“The challenge for me, if I bring IP back from a university collaboration, is that my lab has to be the technology transfer agency. That doesn’t scale,” Herbert said. He gives the example of trying to bring a piece of software into the company from a Lancaster University project. That required the efforts of Herbert, a project manager and two research engineers to interface with the product groups.
At some stage, collaboration simply becomes too difficult. Herbert points to the complexity and unresponsiveness of the EU Framework Programme. He has had to create a European Microsoft Innovation Centre, focused on advanced development, to work with these projects.
“We’ve had to build a special organisation to do that, which is a curious distortion of reality,” he said.
Microsoft’s external collaborations involve engaging with large-scale public projects. The company has launched a European Science Initiative to explore the use of computing in science, engineering and even in helping define new research areas, such as systems biology. The Initiative is funding three efforts: in computational science, in new computing paradigms, and in intelligent environments.
Herbert says such work could have great benefits for society, as well as helping to train new types of scientist. But it is also partly a defensive move:
“When you’re a mature gorilla, you know that something will come out of left field and hit you,” Herbert said. It’s also a funding issue: “I don’t have the budget to fund 50 biologists but I can fund one computer scientist to go and sit with them.”
Herbert describes five ‘strategic pillars’ than underpin his approach to external collaborations. The first is the formation of a European Research Office to manage them. The second is to work in emerging areas of strategic importance to Microsoft, MSR and European science and innovation. The third is to use public/private partnerships, including the formation of dedicated physical Centres of Excellence, such as the Centre of Excellence in Computational Biology formed at Trento in Italy.
The fourth and fifth pillars of Herbert’s approach are to contribute to the broad science and technology agenda, taking a role in defining national, regional and institution science policy; and to work on communication and knowledge dissemination, through conferences, publications, talks, and public relations.
He says that going to national governments with sensible plans for specific activities can be very successful. The Trento centre, for example, received three quarters of its funding, or €8m, from the Italian government.
“We’ve discovered that if you have a coherent plan you can unlock huge amounts of money,” Herbert said.
MSR is now presenting scientific conferences, offering research grants of up to €100 000 in specific topics, developing a PhD scholarship programme and other forms of research funding, as well as developing its influencing powers through dialogues with governments.
“These are all ways of getting connected to advanced research I can’t do in-house and which could have a big impact on us,” said Herbert. “Even for us, partnership is desperately important, not only in core computer science but also in new markets.”
Pilkington began in 1826 and was, for its first century or so, a UK only business. The invention of the float glass process in 1952 enabled it to go global through licensing deals worldwide.
For the building market, Pilkington is now developing various new forms of glass with improved energy saving and temperature control properties, better safety and security characteristics, and even self-cleaning properties.
“We’re adding value to glass despite it being an industry that’s thousands of years old,” said Phil Ramsey, vice president of technology for building products at Pilkington. The company is keen to do more, innovating in raw materials, the energy used in production, and in process control. For that it needs partners.
Ramsey says that partnering can increase the resources applied to solve a problem, share the cost and risk of doing so, and accelerate the process.
“By partnering you can also be more influential in lobbying, legislation and standards,” said Ramsey, which is particularly important in his business, where as, he puts it, “we couldn’t sell some of our products if legislation wasn’t in place to force people to use them.”
There are downsides to partnering though, one of the biggest being in managing the IP: “You need to agree in principle how you’re going to handle it.”
Ramsey says it is also important to avoid an imbalance in benefits and costs between partners if the relationship is going to be sustainable: “The exercise needs to be equally important for both parties.” Trust is important, as is recognising and dealing with cultural and process issues: how will you cope if one company has a five-stage Stage-Gate® process and the other a seven-stage approach?
These issues are particularly important if you choose to partner with a competitor on some jointly useful but non-differentiating technology. Pilkington has shared its R&D in one business area with a major competitor since 1987. This has avoided duplication, but amplifies the issues of trust and equality that need to be addressed in any partnership.
“We now feel it’s become largely a one-way collaboration,” said Ramsey, “that we’re putting in more than they are. But I guess they may feel the same way.”
Co-ompetition can also lead to the development of a strategic interdependence between rivals that can be hard to break free of.
“Perhaps this relationship has gone on too long and is becoming tired,” said Ramsey. “But extracting yourself can become quite difficult. So if you’re going to have a relationship with a competitor, it should be fairly specific.”
One place competitors can work together beneficially is on the development of standards, for example for self-cleaning glass, a product that Pilkington has just launched. Ramsey also feels that partnership may become a requirement to sustain large, risky development efforts in future.
“I wonder, if we came up with float glass now, would we have the resources and the courage to go ahead with that major development,” he said. “I’m not sure I’d be successful [in persuading the board to gamble the company]. I might have to team up in future.”
Ramsey believes partnering with suppliers can speed up the delivery of a new product by developing its supply chain in parallel. This approach has its benefits, although there are issues to do with exclusivity that can be overcome by asking for a lead-time on a particular jointly developed ingredient or process before it becomes available to competitors. As before, the partnership is only likely to work if it represents a similar scale of opportunity for the two partners.
Pilkington is interested in partnering with companies from other industries, for example accessing the silver-coating expertise of film-maker Kodak in order to progress its work on solar control.
“It can be very stimulating for your scientists, but it may be difficult to find win-win opportunities of equal scale,” said Ramsey.
Customers can also be partners, although it is an approach that Ramsey feels is often overlooked. Partnering with customers can be difficult, too. For example, in the automobile industry the customers tend to want innovations to be licensed to competitors in order to secure their supply. This may bring benefits in terms of a flow of technologies from competitors, but it also means your hard-won breakthroughs end up in your competitors’ hands.
However a company chooses to approach technology acquisition, it’s clear that it will have to change to be successful. For the future, Maat at Unilever sees the increasing use of technology acquisition strategies as leading to a change in the function of many companies.
“They will go from being ‘creating and developing’ companies to being ‘adapting and implementing’ companies,” he said.
doi: eiq-2006-007-0013
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