By Andrew Patterson
Exactly how do you take your good idea and turn it into a viable business?
Unfortunately, the numbers tell us too many people stumble at the first hurdle through a combination of poor market validation i.e. not establishing there is actually a market for the idea, and failing to follow a systematic approach during the commercialisation process.
For more than a decade, UniServices, the commercialisation arm of the University of Auckland, has been in the business of turning ideas generated within the university into commercial businesses.
Former CEO turned academic Dr Peter Lee has plenty of useful advice to offer entrepeneurs in this area.
During his eight years at the helm of the country’s most successful university based commercialisation division, Lee managed to double UniServices revenue to $142 million when he left the organisation in March this year.
An engineer by training, these days he divides his time between teaching roles as an adjunct professor at the University of Auckland and spending time at the University of Vermont in the US where he lectures in innovation and commercialisation.
The start of something big
He says when he was at UniServices its positioning line was “The start of something big.” Its aim was to bring the academic and business communities together in more than just a transactional relationship, but instead a relationship based on discovery.
Lee believes NZ has to embrace the whole commercialisation process if it’s to realise its ambitions to become a “smart” country.
“The data says we're good at the front end of innovation. We're good at getting the basic ideas together to create some sense of possibility, but in production and practise, we’re below average.”
“There are a couple of reasons that account for that. One is that our talent pool, that bright, innovative group that graduate from our universities, have a predilection to get overseas experience. It's not a bad idea, but a lot of that talent that would otherwise move into industry and immediately start building those ideas into real products and real services and value-add goes overseas. While they’re supposed to come back, increasingly, as we know, they don’t.”
“A second reason is that the infrastructure itself for innovation in New Zealand is not well developed. We have a few large industrial companies that have the capability and do practise innovation and we have a tranche of small, struggling start-ups that live and die by innovation, but between those two extremes there is a large group of companies and industries that are not practised at innovation at all.”
“So the issue for NZ is that the diverse scale of that large group makes it difficult to assign scarce resources in a substantial way to sustain innovation. We haven’t got a strong history around the process of innovation; the processes to take those ideas and turn them into successful businesses. We're coming from behind in that regard.”
The process of innovation
Innovation these days is thought of much more as a process.
In his best-selling book on commercialising ideas, “If You Build It Will They Come” US based business start-up guru Rob Adams points out almost two thirds of new products fail as a result of poor market research, poor product development or a combination of both.
Lee believes that more entrepeneurs need to think of business commercialisation as a systematic process rather than some hit and miss series of events and while nothing is ever guaranteed you can certainly lower your risk threshold.
“Success as an entrepreneur is not the act of super humans; some special group of people with a special set of powers or the alpha male stereotype sometimes portrayed in Hollywood. It's absolutely not. Innovation is a process. Some practise it better than others, but you can actually go through a stepwise process of taking a glimmer of an idea, through to a commercial outcome. It's that process that we need to understand and practise more substantially in New Zealand.”
But it does raise the question why the world is much more focussed on commercialisation these days compared to a few decades ago? Why do we feel this need to constantly innovate and keep coming up with new ideas almost like a conveyer belt?
“While it certainly has become a global trend, increasingly NZ is waking up to the fact that we are very dependent on a few primary industries. Those primary industries have their ups and downs. When I did my OE in 1975 there were 20 sheep to every person in New Zealand. I heard recently it's down to seven. What happened to the wool industry? You can look to synthetic fibres and the sophistication of that industry to create alternatives to natural fibres as having eaten away inexorably, maybe almost unnoticeably and unassailably at that core industry.”
“Increasingly, you have to wonder about the sustainability of some of our other industries against the attack of alternatives. I think we're starting to feel much more vulnerable these days and we feel that we need to establish an alternative economy, not to displace what we currently have, but to come alongside and provide a little bit more breadth in terms of our future economic wellbeing.”
“Just recently, we've all noticed how vulnerable the New Zealand dollar and our concerns about exports have been threatened or influenced by the contamination incident at Fonterra. While it’s a relatively small hiccup the impact is magnified and demonstrates to us that when you have a dependency on something small issues quickly become very big issues.”
“I think the government gets it, I think most people now get it, and so that's why, quite rightly, we are somewhat desperately trying to establish these alternatives.”
While Fonterra continues to be New Zealand’s only truly global business accounting for almost a quarter of our export revenue, politicians seem reluctant to alienate the all-powerful farming lobby.
Lee believes that while dairy will continue to be the maintain stay of the NZ economy for some time to come, the approach in the future will have to be different based on the experience of other industries which have had to adapt to changing consumer demand.
“I’ve done work for the paper industry which you could argue is a sunset industry to some extent. 80% of our innovation, research and our product development was focussed on existing products to existing markets. But there's always the 80/20 rule, the 20% we absolutely had to carve out, and protect, and foster.”
“That involves looking outside of existing markets and outside of existing products for those alternatives, those breakthroughs. At a national level, I absolutely agree that we've got to support and grow and enable those core businesses, but we must have the discipline as well to establish an alternative, far-reaching, longer term view of potential economic outcomes for New Zealand.”
Linking everything up
Getting the linkages to occur between the various parts of the innovation eco-system remains New Zealand’s biggest challenge according to Lee.
He believes the approach taken by UniServices should be a template for what’s possible in the future.
“During my time in the role we had excellent growth given the type of business we were engaged in. I think that's not atypical of many technology transfers; taking this innovative potential that's inside our universities and building it up into a value proposition for industry. It's actually a good metaphor. Now that I'm no longer CEO my passion these days is actually to take that raw material, which is our graduates and our young staff, our PhDs, our postdocs, and channel their hunger to find valuable outcomes for that in-depth knowledge that they've developed.”
“So I’m really focused on taking that in-depth knowledge causing it to have ideas, cause it to network into something bigger than an idea, but rather a value proposition. Then, take that value proposition through this process of commercialisation to an outcome. That’s the pathway I adopt.”
Some encouraging news
While we constantly hear about the brain drain it seems that is quickly morphing into the brain gain (or the brain retain) as more students opt to consider commercialising their idea from here.
“Just recently I ran two commercialisation seminars for doctoral students. The 50 places sold out almost immediately. They were two of the most exciting days that I’ve had recently in terms of imparting knowledge to those PhD students about how to take their intrinsic, basic knowledge that they'd developed, and see that turn into something of value.”
“People have researched entrepreneurism, serial entrepreneurism. Not the lucky one strike, but people who come back time and time again and their characteristics. Once upon a time, not so long ago, we used to think science was something that was done by Royal Society members in London who were some kind of landed gentry with special capabilities. But then the scientific process was discovered, and it was a series of very well-disciplined steps to generate new knowledge.”
“It's the same with entrepreneurism, it's a set of essential things you do in order to be entrepreneurial. Equipped with that toolset everyone has the capability to run through this process and while some will do it better than others it’s not a refined, small set of special people with special characteristics anymore.”
Progress despite adversity
While we don’t necessarily lead the world with our entrepreneurial output, it seems that NZ is being noticed for one aspect of our innovation eco-system.
“Interestingly, the University of Auckland for example showed up on an MIT survey of global entrepreneurism. We were rated in a very small cluster of entrepreneurial communities, if you like, that stood out from the crowd. That crowd didn’t include the Stanfords and the Cambridges because it was focused on who in the world was doing well in terms of this basic innovative capability under ‘adverse conditions.’
“We had three strikes against us which won’t come as any surprise. We're remote, so we're away from mainstream happenings, we don't have a large group of corporate heavyweights backing us up and we don't have a lot of venture capital. Despite that, we've been able to move the needle and be noticed. MIT is actually keen to visit to understand more about what makes us different in that regard.”
Lee believes that while this is encouraging, it’s time we moved beyond the barriers that regularly get rolled out as an excuse for why we can’t push ourselves to the next level.
“Let's stop making excuses; we can get over them. For instance, when you think about remoteness, a lot of people who travel regularly realise that actually we're 11 hours - Air New Zealand gets this - from most of the major centres on the Pacific rim. We can get to Singapore, we can get to Shanghai, we can get to Vancouver and LA and San Francisco. You just get on the plane, go to sleep, get up, and you're ready to perform. It's very comfortable for us to do face-to-face business, because you know the internet these days takes a lot of the noise out of doing business remotely, but if you need to do the face-to-face, it’s not that hard to do.”
“I'm a big supporter of what the government's doing in this space. It's doing the right thing putting together facilities like Callahan Innovation to enable more smaller scale industries to enter into this innovative process and to become active in that area. As for capital, there again to some extent the government can maybe sweeten the attractiveness to early stage investors of this type of innovative new start-up company but over time it will grow organically of its own accord.
Building networks critical
Lee says that networks are one aspect of the eco-system NZ needs to work on in order to improve its performance.
“A critical aspect of building value is being able to exchange your idea with others, and let others build on it. If you engage in that process you'll find that actually your idea will morph and change and become bigger, you will bring a community of interested people along.”
“When I left NZ in the 70s I went to the US and spent 30 years there and during that time I went into a whole different level of networking. It was difficult. For New Zealanders from my era it was hard for us to be outgoing. It seemed unnatural and I had to make a special effort. But you know what, when you reach out, have those conversations, you experience the feedback and the ability to build an idea over time. Then you start saying "Why haven't I done this before? Why haven't I made a special effort to create a community?"
“The science says it's not the person you know next door, it's actually the weak links that are the strongest links. These are the links that you haven't talked to for a while, the dormant parts of your network. My advice is give people a call you haven't talked to for a while. We seem to have a reluctance that we might be rejected. I can't remember when I was ever rejected. Normally people say: wow, thanks for giving me a call! I really feel special that you've asked my opinion about something. There's a real outpouring of support. So no question networks are important. I think that's one thing that we can learn to do a lot better here in NZ.”
“These days it’s made so much easier for us too. You’ve got the likes of LinkedIn and KEA, another device we have in New Zealand which is really good because you don’t have to go in cold turkey like I did early in my career.”