Newsletter No. 16 - August 2004

Commercial models for R&D - Is there a best practice?

To internalise R&D, to establish spin-offs, to establish join ventures/strategic alliances with research partners - what is the right model for managing R&D in a commercial setting in NZ?

NZ companies are increasingly investing in R&D and confronting the challenge of how to best manage it. It is our view that there is no one R&D model that is right for all businesses. A model will have to be developed to suit your business and your market. The models vary depending on a range of factors, including:

• The sector - much of NZ's economy is primary or biologically based which requires an R&D input throughout the supply-chain to create value.
• Industry structure - the primary or biological focus has created a strong tradition of cooperative research effort with research funded and carried out for the "industry good" by one or two main providers. This is changing to some extent as individual business seek to capitalise on research in specific areas.
• Timeframe - for example, is the business driven by a requirement for short-term returns and accordingly looking to R&D projects that will deliver in this timeframe?
• The understanding or level of technical "literacy" of senior managers, owners or boards.
• The level of capital or cashflow available for investment.
• The level of risk and how this is viewed. Risk or the perception of it may well be significantly reduced by access to appropriate technical resources or advice.

An interesting and valuable perspective that supports this view that there is no one “best model� was recently given by Angus Livingstone, a speaker at the APEC Research and Development Leaders Forum in Christchurch in March 2004. Livingstone is the Managing Director of the University of British Columbia's University-Industry Liaison Office [UILO], which is responsible for transforming scientific ideas into marketable ideas. Although speaking from a university perspective the views are relevant to a commercial perspective.

Livingstone made the following points (the emphasis is ours). Firstly, no one business model stands out as the best structure for the commercialisation of University science, whether it be university owned companies or commercialisation of internal branches of a university. However, the quality of the people surrounding the project and their experience of commercialisation can make a difference. Livingstone also challenged the value of spin off companies, pointing out that established companies are a step ahead in that they already have the market connections, skills and income needed to develop new ideas.

Secondly, for a university the financial benefits of commercialisation are not great. The real gain for national and regional economies lies in the development of 'a population of creative, educated and dynamic people around the universities, who capture value from science for the businesses they work in'.

Through all this there appear to be some consistent themes. These are: there is no "one size fits all" and regardless of the model the people you have, your “Gold Collar Workers�, are critical. We have worked in businesses and industries operating with a range of models for managing innovation and we will look at some of these in a subsequent newsletter.