Reduced public resource
Many universities have had to reduce resource devoted to commercialisation and KT – just at the point they needed it most to diversity funding streams and to enhance their capability in order to demonstrate impact.
This has been compounded for some by the greater selectivity displayed by HEFCE in the allocation of HEIF funding. Between 2010-11 and 2011-2012 alone, and taking the University Alliance group of universities (22) the average loss in HEIF funding was £405,129. At the same time three of the members of this group have had increases – one significant – in HEIF funding. A similar pattern is displayed with other universities.
Volatility of the investment markets
The subprime mortgage crisis and subsequent impact on the finance system and investment climate has made securing investment for the commercialisation of university technology all the more difficult. There has been a noticeable caution in venture capital (VC) funding over the last 2 – 3 years.
UK investment by financing stage
There have been some signs of recovery, but at each point it appears to be the case that access remains volatile and markets unpredictable.
Some have even concluded that ‘venture capital is no longer a business of small investments in small early stage companies‘ or that the early stage venture model has been found wanting.
But, irrespective of the development of future investment dynamics, the only sensible conclusion is not to become entirely dependent on VC funding for a commercialisation strategy and to diversify income streams via including licensing and smaller knowledge-based ventures where returns may compare favourably against heavily diluted University stakes in large IPO’d ventures. In any case, the evidence suggests that it is start-up activity that simulates VC activity and not vice versa1, and hence making something happen via a lean start-up or boot-strap approach is the perhaps the only way to hedge against these trends.
Modern innovation thinking and ‘open innovation’
On the upside, it is clear that many commercial organisations are learning how to reduce the cost of R&D activity whilst increasing the return on investment (ROI) by adopting new innovation practices and processes.
This is part of a general trend towards openness (be that crowdsourcing, open source software developments, or other forms of mass collaboration)2, all of which are themes drawn upon in this resource.
Specifically, the concept of open innovation has frequently attracted interest within the university sector – largely with universities seen as potential components in the innovation division of labour: that is, with universities as providers of knowledge and IP to large corporate organisations. However, as argued by Hossein et al3, the open innovation paradigm also offers lessons for a more effective approach to knowledge transfer for universities. This envisages university commercialisation offices exploiting the innovation of labour – rather than merely acting as participants in that division of labour.
The core concepts of open Innovation as defined by Henry Chesbrough are:
- Equal Importance of external knowledge
- Centrality of the business model
- Importance of identifying type I and type II errors
- Purposive outflow of knowledge
- The abundant underlying knowledge landscape
- Proactive and nuanced role of IP management
- Rise of innovation intermediaries
- New metrics of impact
It is, arguably, university KTOs that are now best placed to gain most from these concepts. This forms the back-bone to much of the approach outlined herein.
The explosion of social media and its impact on knowledge exchange
The use of social media (SM) is no longer regarded as an activity of youth4. Many companies are fundamentally re-engineering their business models using social platforms and others are creating new businesses on the back of web technologies. Indeed Twitter is now successfully being used to predict market trends. In the political domain, revolutions have been assisted by the use of these tools. SM is clearly not just for the kids.
Consequently, most university knowledge transfer offices (KTOs) seem to be adopting social media for the purpose of marketing, which is natural and welcome. But further advantages of social media wait to be fully explored. These include the ability to:
- Reduce the transaction costs that flow from increased collaboration and openness in commercialisation
- Speed the flow of knowledge and making knowledge transfer more dynamic, and accelerating innovation via the use of the crowd – well exemplified by Chris Anderson: How YouTube is driving innovation and Steven Johnson’s ‘Where Good Ideas Come From’
- Enhance boundary spanning activities or individuals and groups by using social research services such as Mendeley and RDInfo
But these fundamental benefits of utilising SM require a change in the strategy and organisation of the KTO – marketing is not the only use. The use of SM in re-engineering the KT business model is addressed in another section of this resource.
Advantages of social capital for individuals and enterprises
We have historically overestimated the value of access to information, and underestimated the value of access to one another and our complementary skills, facilities and networks5. Social capital research carried out by Professor Ron Burt and others have provided plenty of empirical evidence6, at both an individual level and organisational level, that:
- People and groups who do well are somehow better connected
- Brokers do better
This might be intuitive to many – ‘its not what you know but who you know’ – but we rarely act on it organisationally.
Now there is empirical evidence that brokerage and increased social capital has clear performance benefits. If used correctly, social media is both a natural and effective means of extending our individual and corporate social capital. More importantly there is a positive correlation between the use of social media and extent of positive social capital and assistance in making key life and work decisions7.
This evidence is supported at an enterprise level by McKinsey research that suggests that:
Web 2.0 use of these companies is significantly improving their reported performance. In fact, our data show that fully networked enterprises are not only more likely to be market leaders or to be gaining market share but also use management practices that lead to margins higher than those of companies using the Web in more limited ways8
This network approach can have greater impact in a knowledge exchange environment, precisely because each project is new and presents it own learning curve.
In order to overcome the constraints of a ‘closed’ and internally resourced KTO, new business models, methods and tools are required which draw on social capital, and the perspective of a broader range of expertise – specifically those that may be closer to the market. More over each new project needs a new team and set of collaborative alliances – be it a licence, spinout or a collaborative R&D venture.
Whilst this brokerage capital provides a competitive advantage in any profession, it’s arguable that there are greater advantages to the knowledge transfer professional due to the nature of their role. Knowledge transfer is by definition a contact sport – where opportunities are limited by the ability to establish such connections and alliances.
This explains the desire for KT professionals to engage in networking activities and professional bodies. The conundrum is that these very people are the same under-resourced professionals that have very little resource to network. This conundrum needs to be resolved. When the evidence of the return on investment collides with the rapid reduction in the costs associated with networking in terms of time and travel etc, the balance of benefit becomes clearer.
[But even more interestingly, in Burt’s most recent research9 he points to evidence that social capital not only provides better and more diverse information sources, but it also inculcates better decision-making abilities, as domain brokers get more adept at synthesising a broader range of information streams. So in a real sense, it’s not simply ‘who’ and ‘what’ you know, but ‘how’ you know.]
Behavioural economics and modern understanding motivation and co-operation and competition
As well as utilising mass collaboration, one of the objectives of KT2.0, is to find ways of making the process financially affordable. Managing the flow of cash and the cost of remuneration is critical. But, critical too is understanding the notion of the rational economic agent – that acts on economic motives alone – is a myth. If you don’t buy this watch this presentation.
This is perhaps one of the most counter-intuitive propositions in the approach, because it has – to date – formed the basis of much of the economic theory on this. But the evidence increasingly explodes a series of myths that hold back innovation:
Fallacy one – competition is the primary or only driver of innovation
This at best is partial, at worst just as wrong. In fact most significant innovations have resulted from networked innovative activity, which is often not commercially driven – but which has major commercial import in the long term. Steven Johnson provides a good outline of this is his book ‘Where Good Ideas Come From’, on which this TED talk is based.
Fallacy two – people are only motivated by economic self interest
People are motivated by a range of needs – self-actualisation (remember Maslow), the need to feel competent (Shirky), the need to feel connected (Shirky), and the desire for autonomy and master purpose (Pink), among others. There has been an explosion of literature and research on this (see the works of Kahneman, Airely, and Pink etc).
All of these drivers have a significant bearing on the ability to find the right external agents to help you progress your projects. More prosaically, even cash-based motivation alone can be deferred or made contingent, via profit share. Royalty or equity sharing is an effective way to provide future motivation and retention – and generally is not permissible for internal staff.
So the lesson from this for KT2.0 is to pay external agents enough to take the issue of money off the table – but not enough to make the activity worthwhile on its own without some further upside. And that further upside can be anything from equity to autonomy. Nobody wants a coin-operated consultant that has no interest in the project itself or its success. It has to be much better for all to have an intrinsically interested and self-directed agent that is determined to succeed – and stands to benefit from it handsomely if they do!
Fallacy three – large organisations are the only way to make big things happen
Now, the institution, the office or the company are not the only way to coordinate complex activity. Social media provides the ability for much of this to be self-organised: To be self-organised without the overhead cost, and so that it no longer restricts the ability to scale.
If any of this seems utopian and unachievable, the reader is directed to entirely freely generated complex initiatives such as Linux, Apache and Wikipedia, that have outperformed their more ‘commercial’ counterparts in the server software space and in the encyclopaedia space.
Or, more directly analogous to commercial enterprises, the Huffington Post that employs approximately 60 people but engages 700 bloggers/virtual employees or Atlassian that taps into intrinsic motivation and the desire of autonomy and mastery.
Most fundamentally for knowledge transfer practice, this means the ability to move beyond a constraint to work beyond the 20% of projects that a KTO can afford to prioritise. It creates the ability to outsource the bulk of IP and Innovation that would otherwise be left behind due to a lack of capacity or because it was too expensive to justify progressing.
- 1 For an interesting exposition the rise of collaboration as a strategy for moving beyond the Institution for coordinating complex activity see Clay Shirky Institutions v collaboration, http://www.youtube.com/watch?v=sPQViNNOAkw
- 2 Clay Shirky, Here Comes Everybody
- 3 Ron Burt
- 4 Most (79%) of the 100 largest companies in the Fortune 500 list use Twitter, Facebook, YouTube or corporate blogs to communicate with customers and other stakeholders (http://mashable.com/2010/02/23/fortune-100-social-media/
- 5 There are countless examples of these strategies turning round the fortunes of a broad range of businesses. A range of examples are well recored in Wikinomics byDon Tapscott and Anthony D. Williams. A classic example being that of Goldcorp’s radical openness in goldmining resulting in significant returns.
- 6 Hossein S, Liu W, Mccaul B, and Kehoe D. ‘Enhancing the flow of knowledge to innovation: challenges for university-bases knowledge transfer systems’ in Bessant J and Venables T Creating Wealth from Knowledge – Meeting the Innovation Challenge.
- 7 as research from the PEW Internet and America Life Project demonstrates
- 8 The rise of the networked enterprise: Web 2.0 finds its payday’, http://www.mckinseyquarterly.com/Organization/Strategic_Organization/The...
- 9 http://www.ginnn.com/blog.aspx?bid=8272