Entrepreneurship – automation, animation and autonomy
Focusing on the overall outcomes
From all that precedes, it is clear that the ultimate goal of the KT 2.0 approach is to create the right ecosystem in which more can be done for less. More skills, more people, more resources, more risk share and more perspectives are brought to bear on the complex and challenging tasks of Knowledge Transfer (KT) as an overall process. This focus on the process is not a bureaucratic one, but a focus on the overall commercial outcomes. Crucially these commercial outcomes are considered within the context of the institutional business model and strategy, and the implications for other major core funding streams. The focus on the overall result is designed to ensure an inherently more commercial approach where resource is not dictated by, or bogged down in, the individual interests of the team members or individual ventures, or even those of the KTO.
Seeing the woods for the trees
As we have seen in the section motivating and embedding change, measuring success is critical to demonstrating success and maintaining enthusiasm. As always, what you measure is what you get, so ensuring that the metrics are aligned with maximising ‘impact’ and the optimum returns is critical. All too often this motivation is provided by individual deal making exploits. The inevitable dynamic of individual projects needs to be supplemented, or even supplanted, by focusing on the following:
- Don’t get precious about early stage opportunities – sift heavily using external validation, the perspective of the crowd, or other market pull. These external perspectives should replace the drive to recover the PI’s, the KTOs, or the business manager’s sunk costs, as the guide to project prioritisation. Internal committees should certainly not make this call. There’s plenty of evidence to suggest that individuals are not always optimally rational when balancing sunk costs versus opportunity costs, and this applies equally to KT. Innovation accounting is the only way to guard against this (the only perseverance that is permissible is the downward cascading of opportunities to less resource-intensive commercialisation routes).
- The primary objective of the KTO is to facilitate that individual external drive, to increase the amount of players working towards the KTO’s goals and, finally, to optimise the deals that are done. Each team member’s performance objectives need to relate to the overall portfolio and how they oil the machine, and not just their own project list.
- If no further resources are available within the university, or the risks do not warrant further support, then you may consider giving away ‘for free’ or letting someone else take the risk of development (and accept there may be other associated benefits, such as reputation, tacit knowledge exchange, or relationship building). In this context, as part of a cascading IP strategy, the consortium advocating the free assignment of IP makes considerable strategic sense. Considered at the end of the tail the giving away of IP for free to companies who then may be required, or even simply expected, to engage with the university in consultancy and collaborative research, achieves a real value.
Measuring the overall commercial profit and loss
It’s easy in the cut and thrust of commercial activity to lose sight of the big picture. The only way to guard against extraneous influences on the goals of the institution is to ensure that the return on investment (RoI) figures are crunched rigorously and regularly to ensure that the RoI is optimised for the university’s benefit overall.
- Understand the implications of dilution. Ensure that you have an appreciation of the likely (un)regularity of lightning strikes happening, the delay in realising returns, and the costs associated with realising. Moreover, project what you are likely to receive, though this will be a guesstimate in lieu of precise cap table projections. It might be surprising how less rigorous the KTO may be in accounting for this bigger picture than its VC partners. (NB none of this is to suggest that investors are not crucial to this ecosystem, far from it!)
- Understand the current market dynamics and how these might impact on your model and ensure that a mix of types of investor, with a range of appetites for risk and for types of business are available and that you are not locked into a single profile of investor. Ensure that you have a mix of venture capital (VC), angel and corporate investors (link) as well as a pipeline of licence deals. For example BVCA reported in 2009/10 that Angels have reacted to the market crash differently to VCs, who have concentrated on consolidating their portfolio. In contrast Business Angels are investing at levels close to the previous years
- Compare various lines of commercial activity when accounting for and comparing respective efforts and returns. Compare the returns from knowledge-based and other types of business that might appear to have lower growth potential but require respectively less resource, investment and consequently dilution
- Understand how the KTO’s strategy plays into core university funding streams, e.g. HEIF and REF if a UK HEI
- Ensure that you maximise existing revenue streams. Often there is a focus on chasing new deals and not optimising the current deals – make sure there is an equal focus on retaining current income streams as opposed to deal chasing (Deal Junkies). As with all business it is easier to do new business with existing customers either as a new deal or chasing fees due. Post-deal management of licences and a continuing relationship with the licensee can make a significant difference in outcomes and returns and increases the possibilities for cross-selling and/or further joint development opportunities.
As already touched on in ‘Connected, cascading and open’ there is a possibility that the economics of commercial KT can shift the cost and return equation in some deals.
Using the long tail metaphor again, it may well be the case that the aggregate of category ‘B’ activities brings home more bacon than category ‘A’ activities/or lightning strikes. First of all it’s too difficult to tell which opportunities will fall to the right or left of the red-yellow divide; furthermore it’s not possible to tell which will actually accrue the greatest margin (RoI to the university as opposed to other investors). Moreover, when the direct revenues that are attached to the Impact Agenda via REF etc are accounted for, the odds are that the yellow area might be the most commercial.
The bottom line is that, although such a graphic might help visualise the big picture, only through rigorous innovation accounting, and number crunching, is it possible to tell which of these streams of activity provides the best ROI. Playing to the full spectrum (however the activities are ordered on that spectrum) is likely to increase the overall return, especially when direct ‘impact’ funding streams are accounted for.