Who does what

The Rules of the Game

CC BY-NC-ND 2.0 JISC infoNet

Defining a division of labour - who does what?

Given the twin objectives of reduced transaction cost and increased autonomy for external partners, it will be important for both the university and the consultant to ensure that the roles and responsibilities within this virtual team are clear. The university will not have the resource - nor desire - to back-seat drive the projects, but it will need a 'case manager' with whom it will be the consultant's responsibility to liaise and provide updates. Other players and stakeholders will need to understand where they fit within this virtual team.

For this reason the Knowledge Transfer Office (KTO) will expect the completion of various 'project management lite' templates describing the virtual team and roles. The university will provide the consultant with a template for this as part of the starter pack. This will form a foundation for further project management, ensuring that we know who will do what.

Project management - light but right

The template consultancy contract on which consultants will be engaged will contain an outline, simple, but meaningful Gantt chart of key milestones. Early milestones may be related to your payments from the university.

The university may provide consultants with access to various online project management tools that can be used to monitor progress. The benefit of this should be clarity without have to duplicate meetings or absorb consultants' time in unnecessary meetings. The KTO will expect consultants to advise when the projects are going off track, but will understand that these type of projects are bound to go off track in many instances.

Key to the 'project management lite' style approach will be an understanding of the relationship with key suppliers and key users. Users in particular will commonly approximate the end-user or the 'market'. Throughout case management of the project the university will be looking for an articulation and greater clarity as to who plays that representative role in the project team.

Remuneration - the details

The intention is that the bulk of the reward provided to the consultant be provided via 'sweat equity' (or in the case of a licence deal, royalty share). Any consultancy payment is simply to 'ease' the way to that realisation.

The general provision made to the consultant is in the region of 10% of the equity in the new company (or deal), though this may increase in scenarios where there is no consultancy payment made (as some consultants have elected for in the past), or may decrease where higher consultancy payments have been arrived at or where the licence payments are likely to be significant without dilution.

In general 5% of this allocation will be made on successful incorporation of the company, following the satisfaction of any of the university's requirements-related approvals for incorporation. A further 5% will be allocated as part of the option scheme related to certain basic (and early) targets related to investment, turnover or profitability. This is simply to ensure that all interests are sufficiently aligned, and to encourage an interest in the (early) medium-term success of the venture, post the first allocation of equity. Of course, there will be an interest in realising the value in the initial 5%, and there will also potentially be interests in providing ongoing consultancy services to the new venture and/or the prospect that a consultancy may gain a more long-term role in the venture as, for example the Managing Director. Nonetheless, this will be for agreement between the university, the founders and the consultant, and should be agreed in advance of incorporation.

Some basic matters that the consultant should cover

As consultants will note from the above they will be expected to have the requisite skills to make deals happen, and will be selected on the assumption/track record that they can cover the necessary bases. (It's unlikely you will make it onto a project if you evidently don't have this experience.)

Autonomy and trust will be the key to this. Nonetheless, it's wise to be clear of the expectations from the university side. Consultants should be clear that they can, themselves or via their network, cover the following basics of due diligence and business development and should be able to report this back to the university

Managing risk whilst accelerating development

One of the features of KT 2.0 is the way in which consultants or development teams are given the freedom to progress their activities without being encumbered by the need to work to a strict and rigid workflow provided by the KTO. Having said this, the KTO will have made a commitment to a development team in granting them some exclusivity in term of driving the exploitation of a piece of IP: but in return they need to manage the balance between risk and opportunity of their entire IP portfolio, of which this project is one part.

The means by which the KTO manages this balance is to ask teams from the outset to identify in broad terms, verified by whatever level of evidence they have available, the key areas of risk and opportunity associated in that project and, in particular, the overall business case driving a particular innovation project.

Innovation projects inherently embody a high degree of uncertainty at the early stages and traditionally organisations use a variety of mechanisms to ensure that risk and resources are balanced according to the risks identified by the project management team. Stage-Gate Process is one such mechanism but like other similar mechanisms is sometimes criticised for slowing the progress of a project as a result of management bureaucracy involved. KT 2.0 attempts to free development teams from the inertia experienced when ponderous stage and gate processes are used by asking teams to take the main decisions surrounding risk management themselves but do so in a way that justifies decisions they make by the quality of evidence they provide to KTO managers.

Balancing types of entrepreneurial risk

More critically, rigid stage-gate processes often focus solely on the elimination of 'false positives' - those projects that are likely to fail, in order to avoid waste of resource. Less commonly are they concerned with the 'false negatives', the mistaken culling of innovation projects that may have significant value. The holy grail of any innovation process is to achieve the balanced portfolio - a portfolio that is diverse and manages risk of falsely eliminating and falsely supporting innovation projects. This is the notion that 'a [balanced] portfolio of assets predictably outperforms a more correlated one is an important concept and one which is approached from multiple angles', a perspective also strongly argued for by Alpheus Bingham and Dwayne Spradlin co-founder and CEO of InnoCentive, respectively.

'So if you never want to make the error of a false positive, you need to ruthlessly terminate projects with any hint of potentially failing - to avoid unnecessarily committing resources to them. Thus, you create many more false negatives in the process'.²

The classic case example of this over elimination of false negatives is Xerox and its elimination of projects from its pipeline that went on to generate more value than the company itself.

Conversely the opening up of the stage-gate process to allow for more risk taking in relation to early ventures inevitably creates the potential for more false positives, and this could lead to the waste of valuable resource. A highly collaborative approach, however, can change the risk equation: Where a greater proportion of the resource at risk in progressing early-stage innovations and ventures is shared, or even outsourced to willing external partners, the more the it become possible to open up the stage-gate process to allow through potentially successful projects that may have otherwise been killed by an overly conservative selection process. This allows for a further tilt in the direction of supporting more enterprise, and more activity for the university - and more opportunities for external partners. Additionally entrepreneur-consultants get to choose the level of risk that they are prepare to take, and to pick and choose projects. Consequently no partner is accepting absorbing all the risk on a project that they are unconvinced of its chances of making a return. This is a core objective of KT 2.0.

'One important component of open innovation is that it creates an opportunity to share risks and expenses with external parties. The adverse consequences of the false positive are effectively neutralised when someone else is underwriting some or all of the costs'²

Nonetheless this does not equate to not taking a serious attitude to project filtering. Far from it: and external consultants are advised to read the section on Assessing Risk before pitching for project. Merely, KT 2.0 seeks to balance the false positives with the false negatives and to engage collaborative resource to make the filters better and less prohibitive to the university at the early stages. Also any screening activity is biased towards external validation over internal validation. Not only does this help guard against the false negative, but it shares the effort and reward involved.

Ultimately, any stage delay that prevents a new venture from obtaining external validation is likely to kill the sole opportunity to gain the only data that matters - external market reaction.

¹ The Open Innovation Marketplace - Creating Value in the Challenge Driven Enterprise, Alpheus Bingham & Dwayne Spradlin

² Ibid