Collaborative R&D and Innovation
Cool Companies magazine 2008 Vol.3 Issue 1
Content by Donald Rumball
Edited by Claudia Sammer, Founder and Editor of Cool Companies magazine
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Globalization has made research and development (R&D) and commercialization activities critical to the survival and success of companies of all sizes. However, it’s harder for smaller companies compared to bigger companies. Given the limited resources and high associated risks involved in innovation development for small and medium-sized companies (SME), it makes sense to partner with other organizations in a collaborative project to achieve innovation.
Cool Companies magazine believes collaborative innovation is just emerging. This article presents results of a recent case study that explores the collaborative activities of a handful of Canadian companies. It offers practical insights to pioneering leaders seeking to enter collaborative innovation relationships today. Included are the identification of 6 types of collaboration relationships, and 3 case studies that provide key insights into the way collaboration works and doesn’t work.
Motivation for Collaboration
In the ever-growing global economy, innovation, research and development (R&D) and commercialization activities have become increasingly critical to how firms achieve long-term competitive advantage and success. This imperative presents fundamental challenges as to how firms organize their innovative activities.
Innovation is difficult to “manufacture” and complete successfully. Spending on R&D is one measure of innovative effort, but large R&D expenditures do not always guarantee successful innovations. In particular, the ability to translate new ideas into a business application (i.e. commercialization) is a critical element in the process. Innovation also depends not just on technology but on factors such as human resource strategies and management capabilities.
Innovation is important to firms of all sizes, but smaller firms have a harder time developing innovation. Given their limited resources, they are likely to be more successful if they collaborate with other organizations. Research suggests, however, that smaller firms often do not collaborate because they face significant barriers. They suffer from the inability to identify suitable partners, to forge co-operative agreements and to acquire tacit knowledge.
It would be helpful, therefore, to look at examples of small firms that have been effective in conducting R&D in collaboration with other organizations. Such collaborations can also extend into commercialization efforts as well.
Types of Collaborative R&D and Innovation
In looking at collaborative innovation, there are 2 basic sets of circumstances that establish 2 different dynamics of collaboration—research push and commercial pull. These collaborations can be further divided into 6 different types.
RESEARCH PUSH
The first category—research push—usually involves a young business that is built around some intellectual property (IP) that has the potential to be commercialized. The challenge in these firms is to build the infrastructure for a successful company, including hiring appropriate managers, financing the research phase prior to revenue flows and protecting the IP. Part of this evolution includes “beta-testing,” where the technology firm finds a co-operative client that agrees to be the test bed for fine tuning the product during the process of implementing it for their own operation.
There are 2 types of research push collaborations:
1. Spinoffs
A university-based researcher launches a new venture to commercialize research perfected in the university’s labs.
2. Contract research
A spinoff performs contract research for a large company that, during the course of adapting the SME’s (small and medium-sized companies) IP to the client’s requirements, serves to refine the technology into a commercially viable form.
COMMERCIAL PULL
In the second category—commercial pull—the demands of clients are driving R&D. All firms that have successfully navigated the research-push phase go on to the commercial-pull phase as they diversify their original technology through the development of new products and processes. This diversification includes not only new product development, but also the research agenda itself, which comes to be determined by market considerations rather than scientific curiosity. There is a second source of commercial-pull firms— those that may not originally have depended on protected IP for their growth, but, as their client base widened, have developed an R&D unit to enable them to respond to client needs.
There are 4 types of commercial pull collaborations:|
3. Sponsored research
An SME contracts with researchers to perform R&D that it requires (SME owns the resulting IP).
4. Joint ventures (JVs)
An SME has identified a market for a product and needs R&D to develop the product, so it signs an agreement with a large organization to develop the solution jointly (Shared IP).
5. Invention watch
An SME builds a relationship with researchers whose work is relevant to its business so that it can identify inventions that it might be able to commercialize (IP bought or licensed).
6. Invention brokering
Same as invention watch, but the active agent is the intermediary rather than an SME and the motive is to ensure that inventions with commercial potential don’t fall between the cracks.
General Insights
• Perhaps the strongest message to emerge from this case study is the degree to which it all boils down to the individual. Successful business development is not only about science and technology. Individuals make an enormous difference; good personal relationships, inspiring mentors and advisors are key.
• SMEs need a strong base of technical competence that will make it worth the while of universities and companies to collaborate with them.
• SMEs need a clear understanding of and sensitivity to the different cultures of collaborators; as they cannot change these cultures, they have to work around them and appreciate their strengths.
• The financial and human resources to “stay the course” are essential – whether it be in negotiating agreements or in persisting with the research through difficult or even seemingly hopeless periods.
• It is important to have open and frequent communication with the collaborator, thereby enabling problems and roadblocks to be identified early; this is more important than formal structures for communicating.
• One of the main barriers to collaboration is the ability to access potential partners—researchers in the case of SMEs new to R&D, large firms in the case of SMEs seeking joint ventures. Establishing networks between stakeholders and persistence appear to be the most promising solutions.
• Collaborations generally demand detailed written agreements that establish the rules for IP ownership and participation requirements. These agreements can often extend to 50 pages or more.
• Spinoffs need to make the transition from research push to commercial pull as rapidly as possible.
• During the risky phase of business development between launching a spinoff and commencement of revenue flows, there is a lack of financing. This financing would be best supplied by angel investors.
• The selection of the CEO for a spinoff is of critical importance. Perhaps the most critical aspect to the success of collaborative innovation is the importance and difficulty of attracting top-notch talent to lead spinoffs.
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