Commercialization

After explaining our new software platform to Dr. James Wasmuth, a post-doc at the Hospital for Sick Children in Toronto, he asked me how we could compete with a university that may write a similar software application and offer it free as open source software. His view of the situation was that people would rather use free software than pay for software with the same functionality. His is a common view of software that is based on the assumptions that:

1. the technology is the product
   
2. the value of software is in the code

If a university group, funded by a grant, developed code that could reproduce the feature set that we as a for-profit company had also developed, they would have technology that would be comparable to ours. But technology per se does not have value in the market. Only by commercializing that technology through a product development process can you deliver value to the market. Although the university group may have employed certain commercialization methods; a snazzy user interface, documentation, etc. it is doubtful that they would have employed enough of these methods to make the software truly commercial. Universities neither cultivate the skills nor fund the efforts of commercialization and thus any attempts at commercialization would tend to fall short.

With that in mind, the simple answer to his question was "we don't." Our intent is to provide a commercial software product to the market. A product that has the full suite of commercial features such as proper documentation, high reliability and customer support and training to name a few. If we came across a university group that was developing a similar technology our strategy would be to collaborate; there must be something that they have that our product does not which could lead to licensing their technology in our product.

The second assumption is the old "factory model" of software production; software has the value characteristics of a typical manufactured good. This concept has been thoroughly debunked by Eric S. Raymond in his seminal book on open source software: The Cathedral and the Bazaar. Because software is in constant flux; expanding, adding new features, fixing bugs and adapting to new environments, it is never really "finished," you simply use a single version of a process that will continue on into the future. The value of a single static version of that code is small, what is of much more value is the ability to have access to the continuing process of development.

Basic Research

This is where is all begins; from the creative minds of scientists allowed to pursue their ideas, hunches, dreams, etc. The main mission of scientific research institutions is to conduct basic research; research whose goal is the advancement of knowledge. It is a creative and exploratory process that is motivated by the curiosity of the researcher. Basic research is conducted without a targeted end point; it proceeds from one discovery to the next without a firm idea of what the next discovery will be. Nevertheless, basic research often uncovers new inventions that may have practical applications, applications that may even become commercial.

The process of conducting and funding basic research at an academic institution follows a cyclic pattern: the generation of ideas, grant submission and funding, research, publication of results which leads to the generation of more ideas and the cycle continues. Due to the close relationship between university research labs and the government granting organizations, and the entrenched processes the support the cycle, this cycle can continue as a virtually closed system. The bill, however, is picked up by the taxpayer, a taxpayer who may be interested in where all this money is going. This leads to two ways out of the virtuous (vicious) cycle:

1. The government granting organizations want to provide some sort of metric for demonstrating the benefits of their work.
2. The research organizations want to generate revenues from sources other than the granting organizations.

Although numbers of publications and/or patents are metrics that are often used to measure the productivity of research, they fall a bit flat to the general public. What the public seems most interested in are: jobs and products. If research can generate jobs and the corresponding revenues and/or produce products that are useful to society, the general public will support the spending programs.

The virtuous cycle of grant writing, research and publication is well trod and fairly reliable, the path of technology transfer is much less so. Although there have been attempts to provide ways of funding this path, it is nevertheless fraught with risk. And, for most researchers, embarking on the tech transfer path may mean a reduction in their research productivity; something most researchers that have worked hard to build a reputation are loath to do.

Technology Transfer I

Technology transfer is the process of transferring a body of knowledge or specific technology from one entity to another. No big deal, this happens every second of every day, in fact it is happening now as the knowledge of this blog is transferred to your brain (or, if you're a Web crawler, this is being transferred to a search engine's database). However, in the official definition, tech transfer is the transfer of technology developed at a scientific institution as the result of their research efforts, to a commercial organization for the purposes of commercializing the technology into a product or service that has value to a larger market. Fundamental to this process is the concept of core competency; a scientific institution's core competency is research and a commercial company's core competency is developing and marketing products and services for profit. Since many scientific institutions are non-profit, employing commercialization resources is not within their mission and therefore must be outsourced.

Exactly where this division between research and commercial is is not clearly defined; during economic periods of growth research can be transferred at an earlier stage of development than during periods of slow growth. This amounts to the ability of the commercial entity to accept risk; during periods of slow growth the capital markets are tighter and have a lower tolerance for risk. Research laboratories that receive the majority of their funding from government sources are not as sensitive to economic cycles, in fact their funding usually increases during periods of slow growth (recessions) due to government fiscal policies.

In general the capital markets determine the point at which the technology is commercializable. Research laboratories use a variety of methods to promote their technologies including forming relationships with entrepreneurs, venture capitalists and spinning off their own entrepreneurial efforts. Some university systems have technology transfer offices set up to facilitate this process. The bottom line is; no one has a formal process at this point, it's much more an art than a science. One thing is clear: research organizations in the U.S. are sitting on huge amounts of valuable intellectual property; their ability to translate this property into capital rests on their ability to successful transfer the technology.