Innovation’s not easy…and there’s other ways to get value from it

By Peter Kerr 19/01/2012

According to a couple of intellectual property commercialisation experts doing a mini road trip late last year; a) we’re doing it completely wrong, and b) realise that patents can be sold and/or licensed.

Paul Adams of Auckland-based EverEdge IP says while New Zealand has no shortage of incredible ideas for a world that has a huge demand for innovative products and technology, there’s a commercialisation gap in this country. It’s not so much what people commercialise but how it is done that matters most.

And the way most Kiwi companies (and others around the world too, so we shouldn’t feel we’re alone on this) are set up, innovation and commercialisation is almost doomed to failure right from the get go.

Among his observations are:

  • Having too many ideas can be worse than having too few
  • Commercialisation is expensive (for every $1 spent on innovation, typically $7-$15 needs to be spent on commercialisation) and starving ideas does not succeed
  • Selecting the wrong ideas creates major long term problems
  • There are obstacles to innovation inside corporate structures
  • Incentives and compensation for innovation is back to front
  • Decisions are driven by a desire for solid data — but high growth innovations have little available data (hence the tendency to choose ‘safe’ innovations
  • Talented managers are rapidly promoted — with no time to understand areas well enough to commercialise, plus a tendency to concentrate on the short term payoff ideas

‘If a manager promotes an idea that is wildly successful, they often receive little or no direct reward,’ says Adams. ‘If they promote an idea that fails, then they’re often punished with a loss of career prospects. Such an all risk, no reward situation tends to the promotion of safe, well-known ideas that are rarely high growth.’

Adams says it effectively means that organisational pressures kill innovation; and it isn’t that managers are stupid, they are simply responding rationally to their environment. On this premise, ‘unless we change the environment and the way innovation and commercialisation are treated, managers will continue to make decisions that retard or ignore the highest potential innovations,’ he says.

He suggests a number of ways around this rationale yet destructive outcome, contending that the number one factor in success in innovation and commercialisation is CAPABILITY. From Adams point of view, companies must build an internal commercialisation capability while working with an external capability to help deliver immediate projects and build management capability he says.

The corporate and commercialisation skill sets are almost completely different he says.

Whereas the classic corporate skill set is structured decision making processes which looks to reduce risk, a commercialisation mentality is flexible, responsive and even ad hoc in its decision making, while being able to accept and work with risk.

While corporates favour specialists, avoid failure and work with reliable, solid data, commercialisation favours generalists, finds that failure is frequent and data is often unreliable and irrelevant.

The corporates target large, well known markets with quick certain paybacks while preferring certainty and known facts, commercialising companies’ initial markets are often small and unknown, payback is often distant and uncertain, at the same time being comfortable working with uncertainty.

Adams’ presentation segued into Chicago’s Global IP Law Group managing director Steven Steger who contends that NZ businesses are almost totally ignoring the option of selling and licensing patents overseas.

This is a legitimate way to extract extra value from R&D, and the sale of IP is a means to make more money beyond the physical shipping of a tangible product he says. Patents should therefore be seen as something separate from the actual business, and there is increasing recognition that it is a separate asset.

‘A company may pursue a particular line of R&D, but if this doesn’t result in a particular product or service, a return can be obtained from selling the patents,’ he says.

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