A month or so ago I took a step back from the day-to-day activities in the office and thought about the business from an outsiders point of view. Not just our business here at WaikatoLink, but the tech transfer business in general. The stats from AUTM and ASTP show that only a small percentage of TTOs break even consistently. Could anything be done about that?
What, I thought, would your every-day business leader (let’s call him Bob – I’m picturing a brown suit with elbow patches) think if he were pulled out of his manufacturing business and dropped into your average TTO?
Bob first takes a wander around the organisation and recognises how well run it is. The disclosure processing is first rate, the market research excellent, the technology development efficient, the IP management top notch, the commercial managers have great relationship-building skills and the governance is just right. In his terms, the manufacturing plant is running well and able to cope with high volumes of work. Bob is happy, though a little concerned about the cost of maintaining the staff.
He then looks at the supply chain. Oh dear. Bob is used to having a consistent supply of components of a specified quality from a small number of enthusiastic suppliers. Components that are designed to make something that his existing customers want. He soon finds that the TTO has a few hundred suppliers (some more active than others) who deliver ideas of variable quality (varying levels of development), from every field under the sun. Supply isn’t consistent and some of the suppliers aren’t all that interested in being suppliers at all; in fact their promotion prospects improve if they don’t get involved. But one in fifty ideas might make it big so there’s hope.
How do you maintain core staff capabilities when the volume and timing of supply isn’t consistent, Bob wonders? And how do you build a good product, making the most of the components, when you have to employ (mostly) idea-processing-generalists rather than product-specific-specialists that most manufacturers employ? Maybe it has something to do with the marketing.
Bob takes a look at the marketing. The commercial managers (along with the consultants that the TTO sometimes uses) are skilled at learning about new markets and new technologies. They are excellent at getting feedback from the market about the ideas and working out what their key selling points are. They are good at building relationships with companies who might be interested in buying (though this is understandably time consuming). But, due to the nature of supply, once they have worked up the relationship and made a sale, they rarely go back. Most of the time they don’t even go back to the same market sector. No easy-to-look- after-and-lucrative repeat customers here – an essential factor in most successful businesses.
So, Bob asks the TTO management team, “If you have no control over the supply chain, you have no idea what you’re going to make and no chance to build up long-term relationships with buyers, how on earth do you ever expect to break even year-on-year?” The management team stare at their shoes and mumble about that occasional (one in fifty) big opportunity, the returns from which (once the university and researcher revenue share has been taken off) cover the costs of the 49 ideas that don’t make it to market or don’t make much of a return. Bob asks if the TTO consistently sells a one-in-fifty idea year in, year out – that could make for a viable business, he thinks. Err, no. “Do on-going royalties from earlier licenses cover operating costs?” asks Bob. They might once the company is a little older and has done more deals, say the management team. Some TTOs strike it lucky and get one or two technologies that are a long term royalty gold mine, but most take a long time to get there.
Bob paces up and down for a bit, getting his thoughts together. He goes back to the management team and asks…
“What if you looked at your existing market expertise and (soon to be forgotten) buyer relationships and looked at new ways of re-using those?”
“What if you approached other TTOs and offered to partner with them on taking their IP into those markets and companies, in return for a revenue share or consultancy fees?”
“What if, when there was an idea disclosed in an unfamiliar field from your university, you identified other TTOs with expertise and partnered with them to take the idea to market, rather than spending an age and a fortune developing expertise and relationships? Yes, you would lose a share of the revenue, but that’s better than no revenue at all.”
“Wouldn’t this go some way to improving consistency of supply and demand, enabling you to build up distinctive and marketable competences, as well as those essential lucrative repeat customers? “
Bob’s work here is done. What do you think..? Can a TTO ever operate as a regular business?
At WaikatoLink, we’ve recognised the importance of partnering with other TTOs for a number of years. To date it has mostly been around checking whether there is actually a commercial opportunity, identifying expertise (commercial managers who have taken ideas to market and have those relationships that we could make use of), finding ways to put complementary technologies together and, increasingly, helping us to get out technologies into overseas markets. This is common and there are many great systems designed to encourage knowledge sharing.
What’s new for us is that we have recently started to source IP in specific areas from other TTOs, enabling us to build core (and long term) competencies and re-use our connections to support other institutions.
We are also, within a Kiwinet project, looking at how we partner with other TTOs, nationally and internationally, to take ideas (where we have no track record) to market. We’re basing this around a database of projects from all of the Kiwinet partners.
IP databases are not new, but we think that most of these have been pointing at the wrong people. Rather than targeting industry (alone), we think they should be targeting TTOs and encouraging collaboration. The key to this is making an offer within the listing (e.g. we will give you x, y and z if you help us take this to market) and ensuring that the right people see the listing. That way, others can see why it’s worth spending some time trying to help out rather than going back to the 20 other things they are trying to get done.
We’re keen to hear from TTOs willing to help out in a pilot – get in touch if this sounds interesting.
Nigel Slaughter, GM Commercial, WaikatoLink
nslaughter@waikatolink.co.nz.