The business of science

Given the challenges of commercialisation, Ian Siragher started to wonder: How does science ever get turned into a workable business? It turns out there is more than one kind of operator at the science/business interface

Business isn't rocket science. A business identifies a product, sources it, tells customers about it, agrees a price, delivers the product, collects the cash, covers the costs (hopefully) and starts again. There are plenty of challenges, and plenty of surprises along the way, but usually those surprises and challenges fall into the category of "known unknowns".

Science on the other hand if not exactly rocket science every time, is science. Science begins with unknowns and works to identify hidden truths. Those truths can be the foundation of great products. But the path from thought to delivery is always difficult. At the early stages, the customer, product, price, delivery mechanism, cash availability and so on, is all unknown: the unknown unknowns outweigh the businessperson's unknowns 10 to 1.

Given those challenges, the wonder is that any new technology reaches the market place. And it's not getting easier. Competition is harder, markets are changing faster, regulations are getting tougher, and the funding streams are drying up. Commercialising a technology is just plain hard.

Actually, I dislike the phrase “commercialising a technology” because it focuses on the technology rather than the business. Bringing a technology to thrive successfully in a market place requires focussing on what I see as the Business of Science, not the commercialisation of a technology.

I contend that companies that focus on the Business of Science, (below I refer to them as Boss Businesses), make different decisions, work differently, and have a different mind-set to those Commercialising a Technology (CaT groups). The key difference is the different emphasis placed on readying the entire business to meet the harsh realities of the commercial world. This distinction is important because I believe Boss Businesses have a much greater likelihood of survival and success.

So, what are the observable differences between the two types of organisation? CaT groups are often led by the inventor. There are examples where such leaders turn out to be great businessmen. But there is usually a reason why a University Professor is a University Professor, it is the life they wanted, trained for, and enjoy. That is the reason they didn't become accountants, serial entrepreneurs, venture capitalists, marketing and PR specialists –they didn't want to. A Boss business will be led from very early on by people who have specialised in business, not people whose claim to company leadership is they "Understand the Technology". Those who understand the technology have critical roles to play in understanding how the technology could be applied, but they should not make the final business decision as to how they will be applied.

The focus of the technology application differs. A CaT organisation has 10 new ideas before breakfast, the teams are creative, excited by change and ever alive to the possibilities. With Boss Businesses, the unique benefit of the product is the core focus. The role of the business is to find a way to make those benefits available to the market as quickly and as profitably as possible. Other bright possibilities are not allowed to distract.

CaT groups thrive on having high quality specialists as part of the team, each niche area of the technology often benefiting from its own leader. This has a snowball effect, typically that specialism is not required 100% of the time, the specialists by their very nature seek additional tasks to fill their time – these are not lazy people. Interesting areas for exploration will be identified by them, proposed, championed and followed. This is wonderful and creative, and highly chaotic – and has no place in a Boss Business. A Boss company uses more sub contractors, consultants and temporary staff than a CaT group, this helps them maintain focus. Specialists are employed to advise on key issues, but are less likely to initiate brand new projects.

I do believe that start up grants make some sense, and R&D grants which extend the reach of investor funds also have a part to play. However, there is nothing like revenue from real customers (or lack of it) to tell you if your business idea is a winner. Focus on generating revenue from customers who have options and who are pre-disposed not to buy from you is fundamentally more business oriented than submitting applications to grant bodies who reason for being is to pay the cash out. A CaT group then is one where the primary revenue stream for more than 3-4 years is grant revenue. Such a business is in reality playing a shell game and even they don't know where the real value is. Typically there is a lack of a direct correlation between the grant money and unequivocal value generated, and this is a fatal flaw. Boss Businesses will find ways to generate revenue, be it from conferences, license fees, feasibility studies, consultancy, or numerous other devices which validate their idea and show that real value is being generated. I would also argue that it must be customers – CaT groups with a single client are not true businesses, merely differently funded subsidiaries whose existence depends on the decisions of Boards they cannot control.

There is one type of CaT group which falls between these stools, which is the company which successfully completes numerous funding rounds, without ever generating profits during that period. I would agree that these are companies who understand the Business of Science very well, but maybe not entirely which business they are in!

Boss Businesses measure their return on capital, CaT groups measure their capital. Boss Businesses see ownership of assets as a last resort, every pound tied up in hard capital is a nail in the coffin of return on capital. Boss Businesses demands that assets are only purchased when doing so makes fundamentally better business sense than out sourcing, sub contracting, or doing without. CaT groups retain the operating DNA of their usual forebears, University Departments. Until recently University Departments measured success primarily in the acquisition of equipment, facilities, and resources. That is changing, but CaT groups can be identified by this same trait.

Science begins with unknowns and works to identify hidden truths. Those truths can be the foundation of great products. But the path from thought to delivery is always difficult

Boss companies have multiple marketing routes; CaT groups favour published papers and posters. Posters and papers have a part to play in the marketing mix; they can help some customers make buying decisions. But where an organisation’s primary publicity focus is the use of academic publications/conferences to a broadly academic audience then that group cannot claim to be focussing on the Business of Science. Those publications/conferences, bound by convention and rooted in an academic process can be wonderfully written, providing genuine insight, and awe. But at their heart they are about publicising the writers/authors/the science –not the business. So, unless their place with the sales process is completely understood and planned they are almost always a distraction from the true Business of Science.

Boss businesses compete with competitors, CaT groups compete internally. Boss companies usually have clear hierarchies and decision making processes. Decision making might still be messy and inefficient and won't always come up with the right decision – often there is no "right decision" – just an opinion of what seems best.  Such businesses are usually focussed on deciding the way to solve a business problem and achieve a clearly defined goal.

In CaT groups, the pursuit of scientific truth, of the “right” answer, gets in the way. The academic world is one where knowledge is indeed power, where the ultimate goal is to find the truth and where it is perfectly correct to cling stubbornly to ideas until they are demonstrably shown to be incorrect. This is the very strength of science and crucially important. Business, like politics, is the art of the possible, of compromise. It is often necessary to make judgements on incomplete facts, to accept that your great idea, your better mousetrap, your beautifully designed solution, is just not going to be adopted. In which case the team have to disagree and get on with the new route. That requirement is very hard for overtly science focussed teams (CaT groups) to accept, the measure of those following the Business of Science is how well they handle this dilemma.

CaT groups often take decisions that appear tactical but become strategic bottlenecks. A CaT group focussed on a technology will make decisions that suit primarily the needs of the group in a semi personal relationship with the technology. A typical example is establishing critical infrastructure in high cost areas close to the development team, rather than in low cost areas the development team might have to move to temporarily. A fixed high cost infrastructure that was easier to manage for a few years by being convenient becomes a long term liability once the technology is working and cost reduction is the goal.

Having been involved firstly in banking, then for the last 10 years in the R&D arena, I have had the chance to observe hundreds of businesses. These observations have coalesced over time whilst reflecting on many of the successful and less successful businesses I have seen. It is my observation that the failures (defined as having failed to see their product successfully sustained in the market place) display many CaT characteristics, whereas the success stories are more likely to display Boss characteristics.

I also feel the distinction is important because CaT businesses can damage the product development market because:

• They distort the market for investor funds; by being high risk the cost of capital for all R&D businesses (CaT and Boss) is similarly high.
• They distort the way infrastructure is developed and used. Traditional Scientific Incubator units have been developed to support the CaT business model, and this can encourage the profligate use of resources and the garnering of equipment, staff, and resources in the face of more Boss-like (virtual business) models.
• They disrupt the flow of discovery and invention. Distracting great scientists and research teams by encouraging them to spin out into new companies is arguably a great disservice. Force-fitting inventors into the suits of entrepreneurs – requiring them to become business people – robs academia, students and universities of key resources.
• They distort how universities approach commercialisation. The technology commercialisation model sees universities who believe in it focussed on maintaining a large percentage of ownership and seeking a lion's share of the revenue, arguing that without the discovery there would be no business. The technology is the starting point. Smart university IP teams will be more flexible, recognising that it is just as arguable that without the business there will be no technology. Such teams will make smarter deals, apparently accepting lower royalties, but balanced against the lower risks that come with a Boss approach.

I have proposed here a black and white world of two types of businesses, but of course the world is not that simple. My intention is to spark a debate. I offer a measure against which any interested party can assess their own, or other businesses and decide if my thoughts are of value. I have deliberately cited no examples or case studies because the devil is always in the detail and any generalised assertion that Business A is “CaT” or “Boss” is a distraction from the intention, which is to offer a hypothesis, I ask interested parties to test the ideas.

Finally, the views are personal to me and do not necessarily reflect the views of colleagues within the Agenda 1 group.

The Author Ian Siragher, Commercial Director for Agenda 1