Thank you, Lesa (Mitchell) for your thoughtful introduction. And thank you, Tony (Boccanfuso) for your invitation. I am pleased to be back at the Beckman Center.
Before I begin, we should all recognize the increasing role that the Kauffman Foundation is playing in focusing our national attention on innovation. Together with the Council on Competitiveness, Kauffman and a few other organizations and foundations have focused America's attention on innovation. I also want to thank all of you for coming together in this workshop. Many of you that I see around this room already have provided valuable input in other venues and I urge you to continue this work until we resolve the many things that now undermine our capacity to innovate.
Today, I first want to provide a bit of context and background information, so you can see where my thinking is coming from. I will do this by sharing some perspectives on our innovation ecosystem and by looking at data on the global innovation marketplace. This will give a set of reference points for the U.S., the funders and performers of R&D and the place of colleges and universities in this domain. Then, I will turn to a series of specific topics, suggestions and examples - including some that Tony asked me to address - that I hope you may find useful in your deliberations as all of us seek to "connect the dots . . ." of the innovation ecosystem. Above all, I intend to be somewhat provocative in my comments because I think we need to be candid about these issues and challenge ourselves to innovate on innovation.
I. Setting the Context . . .
With that broad outline before us, let me therefore begin with the context and background needed for you to understand where I am coming from. I have three basic starting points for the major themes of my remarks:
First, innovation, or for that matter R&D, does not occur in splendid isolation.
Second, the global distribution of research and development (R&D) investments varies in size, areas of emphasis, and productivity.
And, third, that a global economy will increasingly require efficiencies in the utilization of R&D investments through cross-country public/private collaborations that leverage talent and resources and exhibit "strategic intent" -- that is, a focused strategy that signals economic purpose.
Innovation does not occur in an ivory tower - or, how splendid isolation does not serve us well
In contrast to the conceptual models of old, and much to the chagrin of many of my academic colleagues (or disappointment of critics who harp about the "Ivory Tower"), the simple reality is that innovation does not happen in isolation, it happens within what many are calling an innovation ecosystem - that system of loosely inter-connected elements that has enabled our society to make new discoveries, capture their value in the marketplace, enhance productivity and increase our standard of living.
To be sure, the innovation ecosystem is a complex and interactive one. It is shaped not only by the quantity and sources of funds available to support research activities, but also by the talent pool and capabilities of the scientists and engineers who conduct research, and by the settings in which that research is conducted . . . . . . that is, its "infrastructure" - in the sense of its facilities, its institutional cultures, and those other related attributes governed by geographical location and interrelating organizations and facilities, many of which are increasingly global and devoid of boundaries. The innovation ecosystem also is shaped by prevailing public attitudes about the importance and usefulness of research in the broader context of societal pressures and economic opportunity. Quite simply, what this means is that innovation is impacted by complex regulatory and support environments which, in turn, interact with financial opportunities and challenges across the world.
In a 1996 article in Science, Erich Bloch, a former director of the National Science Foundation, wrote that: "The whole U.S. R&D system is in the midst of a crucial transition...The previous linear model of R&D has been replaced by more complex models, because today's research, design, manufacturing, and marketing processes occur interactively and without clear boundaries between areas."[i]
Elsewhere, Erich also commented that those of us in academic science who are faced with these forces of change seem to be caught in a sort of scientific "midlife crisis" because 50 years of doing research one way has fostered the belief that it cannot be done another way.
Indeed, academics have not come to the opportunity of innovation easily.
As recently as the 1990s, the majority of university leaders did not think that the academy should even be involved in anything related to commercialization. Universities did not accept or take responsibility for any aspect of economic development. Some even went so far as to consider any partnership with industry a sort of Faustian bargain, believing that such relationships forced universities and faculty to sell their souls and corrupt their noble purposes in exchange for worldly riches. Other universities, if not to that extreme, simply were so conservative that they succumbed to analysis paralysis. It made them anxious just to think about engaging with industry.
But remember that risk and anxiety are two quite different conditions and a simple story will illustrate my point . . .
The Surgeon General tells us that cigarettes kill more than 150-thousand Americans each year, and that automobiles on our highways kill more than 50-thousand people per year. But, nobody seems to be afraid of cigarettes, nor of automobiles. However, according to the Deputy Director of the National Institutes of Health, everyone is afraid of sharks. The Navy says that there are about 50 shark attacks worldwide each year.
The National Bureau of Health Statistics doesn't even keep a record of shark attacks because there are so few. (They know how many people are killed by bee stings, but not shark bites.) The best guess is that sharks kill two or three people each year in the United States. But, the fact is that if you went to a crowded beach and shouted "shark" -- everyone would race out of the water, jump into a car, light up a cigarette, and drive home!
That's the difference between anxiety and risk.
However, where reason and calm prevail and where serious, informed analysis takes place, there is much that can be accomplished for the common good. Indeed, the purpose of this workshop is to engage in systematic exploration of the issues and complexities that exist with the goal of resolving or improving some troubling disconnects in our innovation ecosystem.
The ecosystem metaphor is a useful one for many reasons, and other concepts from biology can help to gain further insights. For example, evolution demonstrates that the fastest evolution of species occurred at times of rapid change in the environment and where dissimilar ecosystems came into contact with each other; and symbiosis may better help us to characterize the needed interactions that must occur between industry and the academy.
Indeed, a shortcoming in any piece of the ecosystem is at best inefficient; at worst, it could be a debilitating disconnect that undermines our capacity for commercialization and economic growth. It is our task at this workshop to find ways to optimize the positive interactions, to minimize or eliminate the negative ones and to seek ways in which we can further enhance the process by whatever means we can.
Thus, I suggest it is time to stop the finger-pointing between industry and universities and learn each other's cultures better. There is much to be gained and I will come back to this shortly.
The Innovation Economy and the R&D Marketplace
Arguably, the global economy is the innovation economy. For the purposes of our discussion, I want to focus only on some data by which we can describe the size and distribution of the R&D marketplace. (Because data from many countries is not readily available on a regular basis, I have not qualified many of the numbers below. For a detailed breakdown please consult section 4 of the National Science Board's 2008 Science and Engineering Indicators).
Globally, the R&D marketplace is now approaching a trillion dollars - which is a sizable industry by any standard.
Presently about 75% of global R&D is done by the 30 OECD countries, of which 83% is dominated by only seven countries, including 45% (approximately $340 billion) by the U.S. alone. However, I hasten to add that the U.S. share of the world's R&D has been declining along with other dimensions of U.S. dominance in science and engineering:
Within the U.S., 62% of R&D expenditures ($224 billion) are derived from industry, 30% ($94 billion) from the federal government and 7% ($23 billion) from foundations, states and our own research universities. In terms of traditional R&D terminology, the U.S. performs about $60 billion of basic research (18%), $75 billion of applied research (22%) and $204 billion of development (60%). Colleges and universities perform nearly three-fourths of the country's basic research, but only a nominal percentage of development. Industry alone performs about $184 billion of the nation's $204 billion of development.[iv]
Of the total federal funding for R&D, we find that 97% is allocated to just seven of the 13 agencies that support research. The portfolio of agency support is distributed as follows: DOD garners 50%, HHS 26%, NASA 7%, DOE 7%, NSF 4%, USDA 2% and DHS 1%.
The agency distribution of federal support to academic institution differs, such that NIH and NSF provide, respectively 65% and 14% of academic R&D support. Other agencies provide significantly less support:
Data for the portfolio of research areas that are funded are limited, so that we know little more than the fact that about 70 cents of every dollar spent for research goes to life sciences and about 30 cents to physical sciences and engineering.
R&D portfolios across the world are more evenly balanced between the physical and biomedical sciences, and the America's Compete Act, as a result of PCAST recommendations, attempts to better balance the US portfolio, without diminishing our present investment in health-related research. The other six federal agencies provide just 3% of the remaining R&D support, so you can understand why we perhaps have so little in the way of evidence-based education.
Now, let's drill down to university as performers of federally-supported R&D: Within the U.S. academic performers garnered about $47 billion, or 14% of the $340 billion U.S. total, in 2006. Of special concern is the fact that industry supported university research has dropped to below 5% of all university research.[vi]
This 14% academic "market share" for the United States is, of course, distributed among many of the nation's 4,314 degree-granting colleges and universities. In 1995, the number of universities participating in the U.S. research economy was 875, although the top 100 captured 80% of all available funds. Likewise, a few universities enjoy better than 5% R&D support from industry, but - on the whole - they are largely disconnected from industry support and this explains why we remain so far apart on many issues.
It should be noted that in other countries, university R&D market share varies between 6% in the Russian Federation (2005) to 38% in Canada (2006). Of course, any of these numbers, including the U.S. 14% are even smaller fractions of global R&D expenditures. [vii]
So what might we conclude from these observations on the R&D marketplace?
Obviously, academic institutions do not have a particularly notable share of this market -- only 14% and an even smaller share of industrially-supported R&D. So, I would pose two questions: First: Why do we academics feel we are so hugely important in the scheme of things? The second question is this: Can we afford to ignore 86% of the market? Considering the growing international dimensions of R&D, the opportunities to gain market share by "going global" are enormous.
Globalization: The Economic Purpose of Nations
This discussion of innovation economies leads naturally to some general comments on globalization, the speed of which is rapidly transforming science and technology.
Beginning in the 1970s the more rapid pace by which new discoveries began to be quantified in the asset ledgers of corporations ensured that investment funds increasingly began to track the flows of intellectual property developments around the world - which demonstrates the growing interdependencies of the science and technology activities of nations. Indeed, we are witnessing several new ways in which the globalization of markets is affecting both how science is funded and how it is practiced. The Wall Street Journal put it this way: "Open market innovation works for the same reason that free trade works: It enables the laws of comparative advantage to govern the allocation of R&D resources. In essence, a company gets lower cost, higher quality ideas from the best sources in the world, allowing it to refocus its own innovation resources where it has clear competitive advantages. With the right people in place to recognize beneficial trade-offs, the company is able to 'export' ideas that other businesses could put to better use."[viii] (NB A comprehensive review of international science and technology trends can be gleaned from Section 4 of the National Science Board's Science and Technology Indicators, 2008).
Let me point out, however, that it seems like cross-national organizations and other countries are more attuned to these trends than is the US. For example, I had the privilege of being invited to an international conference sponsored jointly by OECD and CONACYT (Mexico's equivalent of our NSF) that focused on public-private partnerships in science and technology to stimulate economic development. The examples were most instructive, including what the European Union is doing to harness R&D program across its "states", what Israel has done to map its strategic economic needs and research assets and what several other countries are similarly doing.
In this regard, the April 2005 issue of MIT's Technology Review magazine nicely captures the differences in how seven countries are using science and technology, and it is telling how aggressively some are pursuing S&T strategies-and how tightly coupled some of these strategies are to the needs or strengths of some of those countries.
There are lessons here for the United States!
The U.S. can learn from what many other countries are doing, and I also think that some U.S. states hold lessons for other countries and for the U.S. itself. For example, although the U.S. federal government has a large and diverse framework for considering R&D policy and funding, most states lack a framework for considering R&D activities, or for integrating R&D at the state level with programs at the federal level. Notably, a 1995 report of the State-Federal Technology Partnership Task Force chaired by the Governors of Ohio and Pennsylvania (the Celeste-Thornburg Report, as it has come to be known) called attention to this disjunction and offered policy recommendation to remedy it.[ix]
PCAST began to address this gap in the US innovation ecosystem and focused its 2004 Cleveland meeting on topics related to what different states are doing to better deploy its R&D resources.[x]
If other countries are effectively solving policy disjunctions within their national boundaries and the new European Union is integrating its science and technology policies and strategies across its individual "states," then surely so can we.
II. Connecting the dots . . .
Having thus provided a context and background, let me now turn to a series of specific topics . . . elements and pieces of the innovation ecosystem that need to be connected, enhanced or optimized. These are among some of the challenges that you will address in this workshop, but of course, the biggest challenge we face is ourselves - our human partiality and the habits we have cultivated over many generations.
1. Two Cultures and the Need for Convergent Evolution
I will begin with the challenge of the two cultures - business and industry - and ask (at the risk of mixing metaphors) "where is Copernicus when you need him?"
Human partiality notwithstanding, the first thing that the concept of an innovation ecosystem tells us is that neither industry nor academia is exclusively central to innovation. We need a modern "Copernicus" to tell us that the innovation economy's "sun" does not revolve around either one of us or even both of us uniquely. Rather, and to return to the ecosystem metaphor, globalization and the new economy are increasingly demanding that we move towards one another - and the sooner we realize this, cease the finger-pointing and stop fighting the inevitable, the sooner we will see much needed "convergent evolution".
Indeed, ad hominem attacks and less than well-informed suspicions or accusations only serve to distance and antagonize. For example, I know of no evidence to support notions that industry is any better than universities at technology transfer. Although many universities are still new to it, some such as MIT, Purdue and Wisconsin are highly effective and seasoned veterans. Others, such as Akron, have been nationally recognized as exemplars and are pioneering in new, innovative directions. Many companies, on the other hand, have large stockpiles of patents which they have accumulated for various reasons - perhaps defensively, perhaps because they simply didn't know what do with them or because they represented non-core technologies in which they had neither the experience nor inclination to commercialize. What is more, a telling reversal of fortunes is underway as some universities like Akron are now assisting industry in commercializing their shelved, non-core technology patents. Imagine that!
I will return to industrial critiques of university technology transfer and related issues shortly, but for now, suffice it to say that schooling ourselves in the language of business would be a good start. Understanding the full dimensions of Bayh-Dole, which many universities and industries misinterpret, is a necessity. Adapting our university structures to more closely address applied and business issues, as Arizona State University and The University of Akron are doing, will also help bridge the divide. And I am encouraged by the fact that the University Industry Demonstration Partnership has been formed by a consortium of companies and universities to identify solutions and models that will improve our mutual appreciation and support the essential partnerships that are being formed.
2. Measures of Innovation: Input vs. Output Metrics
(The following is taken, adapted and updated from my Inside Higher Education article "Beyond Rankings", which appeared on May 17, 2007; see http://www.insidehighereducation.com/views/2007/05/17/proenza )
Research competitiveness and productivity are complex subjects that should inform the development and oversight of R&D programs at the national, state and institutional levels. From a national policy perspective, studies of our national innovation ecosystem - of the factors that promote discovery and innovation - are important to America's economic vitality.
Of course, it is not easy to characterize the wide range of America's R&D performers. Even among the limited number of research universities, institutional diversity is so broad that every approach to rank or even classify institutions has been rightly criticized. Most research rankings use only input measures, such as amount of federal funding or total expenditures for research, when funding agencies would be served better by information about outcomes - the research performance of universities.
However, to rail against new approaches or defend the absence of adequate measurements of institutional performance by saying that the strength of American higher education lies in the diversity of its institutions is ineffectual. So why not develop a framework that characterizes institutional variety and demonstrates productivity understandably, effectively and broadly throughout the spectrum of our institutions?
Steps to improve university performance metrics remain modest. The Center for Measuring University Performance, founded by John Lombardi, has compiled some of the most comprehensive data on research universities. Its annual studies examine the multi-dimensional aspects of research universities and rank them in groups defined by relative performance on various measurable characteristics - research funding, private giving, faculty awards, doctorate degrees, postdoctoral fellows and measures of undergraduate student quality.
A 2005 report of the Center has noted the upward or downward skewing of expenditure rankings by the mere presence or absence of either a medical or an engineering school, thereby acknowledging the problems of comparability among institutions. Lombardi hints at a much-needed analysis of research competitiveness/strengths and productivity, stating, "Real accountability comes when we develop specific measures to assess the performance of comparable institutions on the same measures."
Indeed, a particularly thorny question always has been how to create meaningful comparisons between large and smaller research universities, or even between specific research programs within universities. This struggle seems to arise in part from the fundamental question that underlies the National Science Foundation rankings - namely, should winning or expending more research dollars be the only criterion for a higher ranking? I think not. Quite simply, in the absence of output measures, the more-is-better logic is flawed. If research productivity is equal, why should a university that spends more money for research be ranked higher than one that spends less? The sizes of research budgets alone do not create equally productive outcomes. Other contributing factors need to be considered. For example, some universities have much larger licensing revenues than those with comparable research budgets, and all surveys that measure licensing revenues compared to research income show no correlation, especially when scaled.
Because there are no established frameworks to get at the various factors that are likely involved, I think a good beginning would be to characterize research competitiveness and productivity separately.
Research competitiveness: Because available R&D dollars vary widely by agency and field of research, and because universities do not have uniform research strengths, I suggest that portfolio analyses of research funding need to be performed. A given university's research portfolio can be described, quantified and weighed against the percentage of funding available from each federal agency and, when possible, by the sub-areas of research supported by each agency. For example, the upward skewing of rankings is partially explained by the fact that 70 percent of all federal funding is directed at biomedical research. Likewise, the U.S. Department of Agriculture funds only 3 percent of federal research, but provides virtually all of such funds to land grant universities.
Analyses should focus on federal obligations for R&D, rather than total expenditures, because federal obligations are by-and-large competitively awarded and thus come closest to demonstrating competitiveness. Available data, however, present various challenges. For example, some federal funding that supports activities other than research will need to be excluded from analyses (e.g., large contracts that give universities management of support programs). Also, data are available only at the macro level of disciplines, such as engineering versus life sciences, which means that detailed distinctions between research areas will be difficult to achieve.
In addition, I submit that research competitiveness can only be demonstrated when one university's research portfolio is growing faster than those of other comparable universities, or faster than the rate at which federal funding itself is growing. I call this a "percent growth" comparison and think that, although formally equivalent, it is intuitively easier to understand than the "market share" approach used by Roger Geiger in his 1993 book, Research and Relevant Knowledge: American Research Universities Since World War II. Geiger's 2004 book, Knowledge and Money: Research Universities and the Paradox of the Marketplace, clearly demonstrates how some universities have gained while others have lost their competitive positions in federally funded research over the years.
Ideally, if the data were available, research strengths should be examined over time at the micro level, by sub-disciplines or by areas of emphasis. For example, because growth in agency budgets has not occurred uniformly across agencies or over time, it would be instructive to note how portfolio shares change over time and how a particular university has fared in specific research areas. Battelle's Technology Practice has used new tools for the graphical representation of research portfolios to draw some interesting conclusions about how some universities are linked to industrial clusters.
Productivity: Relative growth, however, begs the question of scaling productivity. Unfortunately, such data are scarce. Three seldom-mentioned sources are, however, available.
First, there is the 1997 book, The Rise of American Research Universities: Elites and Challengers in the Postwar Era, in which Hugh Davis Graham and Nancy Diamond offer new analyses, including comparisons scaled by faculty size. Their approach yields per-faculty productivity data of (1) research funding, (2) publications and (3) comparisons between private and public universities. Although the data are now dated and others have found difficulty with information on faculty size and faculty roles, I believe that the methodology employed by Graham and Diamond is worth revisiting, refining and building upon.
Second, there are the annual surveys from the Association of University Technology Managers that scale productivity in terms of output per million dollars of research activity. The AUTM data look at measurable outputs such as disclosures, patents, licenses and new company startups. Although some of these data are subject to analytical problems of their own, it is notable that the institutions that emerge as the most productive are not those at the top of the NSF rankings. More recently, the Milken Institute has begun using the AUTM data to probe the free market system as related to university research.
Finally, Academic Analytics - a company formed by Lawrence Martin in Stony Brook, NY - is now providing detailed analyses from the best available data sources. Their work has been showcased in the Chronicle of Higher Education and several universities, including my own, are working with them to further enhance performance metrics.
Beyond competitiveness and productivity: The research competitiveness and productivity analyses discussed above are modest suggestions to improve upon the commonly used and all too simplistic more-is-better approach of the NSF rankings. Still, if we are actually to improve our analytical framework so as to advance the R&D policy debate, we will need to develop more sophisticated tools.
For example, in the productivity domain and in regard to determining how one piece of research interacts with another, scaled comparisons could also be generated by measuring per-faculty citations and their relationship to other publications. Here, I think that a good start could be by way of the various citation indices published by the Institute for Scientific Information and through the newer Faculty Scholarly Productivity Index. None of these indices has been, to my knowledge, related to funding data, which presents an intriguing opportunity.
An issue not yet addressed by either productivity or competitiveness measures is that of tracking intellectual property flows. How can we begin to trace the flows of ideas and new technologies generated by universities? This question might benefit from the kind of cluster analysis of citations first pioneered by ISI when it "discovered" the emergence of the new field of immunology. The patent data base would be another resource that could be brought to this task. Indeed, as we will see below, my colleague Gary Markovits, founder and CEO of Innovation Business Partners, has developed new processes and search tools that improve the hit-rate of patent data base searches, and he has worked with the Office of Naval Research on ways to accelerate the rate of innovation at their laboratories. Universities and other federal laboratories would do well to consider some of these approaches.
The public and Congress are now clamoring for accountability in higher education, just as they are with regard to health care, and while the college accountability discussions focus on undergraduate education, it won't be long before they spread to research spending. No longer can we simply assert that adequate and comparable measurements are impossible, expecting the public to blindly trust that we in the academy know quality when we see it. As scholars and researchers, we can and must do better. Otherwise, the predictable result will be public distrust that fails to sustain even the current levels of federal R&D investments.
3. The Role of the Federal Government
Recognizing that the growth of federal R&D investments has slowed and may be declining as a percentage of GDP, and that industry has reduced the number and size of its R&D activities, Jack Marburger asked the President's Council of Advisors on Science and Technology (PCAST) to undertake a study of how the federal government can facilitate and promote successful innovation strategies. Our report should be available by the end of the year and I do not want to steal their thunder or presume to speak on items that we may yet disagree on, so let me just share some observations from my perspective. Scott Steel is here and you should feel free to ask for his input on these topics as well.
Not surprisingly, I think we agree that engagement between industry and universities is increasingly important for innovation and that additional government funding and personnel should now be put in place to support emerging networks of collaboration and reward those who find solutions to regional problems. Of course CRADA's, SBIR's, STTR's and a host of other collaborative programs and tax credits that support R&D and technology transfer have, in the experience of nearly all PCAST members, done much to promote innovation by building an appropriate infrastructure, but new tools are needed and I hope some of you will find good suggestions to bring forward.
Of course, part of the reason that universities and industry have not come together easily derives from the fact that in many disciplines the time between discovery and innovation was previously often measured in decades - with notable exceptions to this disconnect in the fields of agriculture and engineering, both of which (thanks to the Land Grant Act of 1862 and the Hatch Act) had experiment and extension stations in each state. These experiment and extension stations actively interacted with industry to solve problems in agriculture and industry, increasing efficiency for farmers and industry through the process of innovation.
Other disciplines witnessed a major paradigm change with the information technology and biotech revolutions when almost any new discovery or improvement was seen by corporate sectors as an opportunity to translate to the asset ledger in an intellectual property form or better yet monetized or otherwise turned into a revenue stream. Today, as business clamors for innovation in all fields, yet we neglect to implement collaborative models, similar to those used by the experiment stations, with proven value.
As we discussed before, universities perform the lion's share of the nation's basic research, but very little applied or development work. We also saw how little university research, less than 5%, is supported by industry. Clearly, if universities account for only a fractional percentage of development and industry is responsible for 90 percent of development, the two naturally must work together for university-developed technology to be commercialized. Conversely, with governmental organizations, which perform less than 10 percent of development (and most of that is on military technology), providing 63 percent of the funds going to support university research, government is in an excellent position to serve as match maker by structuring appropriate incentives for both parties. I think there is a lot that we can do in this space.[xi]
Universities, however, are not the only group in need of logical innovation partners. IBM, Bell Laboratories and Xerox all have significantly reduced the size of their core research facilities. Others, like Intel, have established research centers at Carnegie Mellon, University of California Berkeley and University of Seattle Washington. This clearly points to an increased demand for external research capabilities, but I believe that in future years universities will again face increasing competition to fill that void, both from within and outside of their ranks. Not only do university and industry seem to need each other's support, but also their work together creates connections that streamline the technology transfer process and help us to keep up with the rapid pace of development. That is why, Don Alstead, the former Chairman of the Lord Corporation, kept an office or made regular visits to many universities - so he could be the first to benefit from the linkages.
Among my industrial colleagues, an important practice for optimizing innovation is that of linking technical needs to discovery and innovation in real time. Thus, in order to optimize our national innovation ecosystem, real-time connections between universities and industry seems a logical way to improve the speed with which we create, assess, apply and distribute new technology.
4. Open and Incentive-based Innovation
Proctor & Gamble, Nike, InnoCentive and the X-Prize, among others, have created a new reward-based innovation model - Open Innovation - that has been getting a lot of attention. Open Innovation reaches innovators globally with challenges to solve specific problems with promises of significant cash rewards for those who are successful. For the funder, Open Innovation provides minimum risk in that payment is made only for successful results. Moreover, the X-Prize Foundation has found that often those who aspire to earn the prize leverage resources far in excess of the prize money.
Quite simply, the process of Open Innovation, a model for which the University of Akron Research Foundation hosts semi-annual events, tells us that universities, major industry and small entrepreneurial companies often must look outside their own organizations to find solutions to problems.
Even the venerable Encyclopedia Britannica, perhaps succumbing to the pressures of Wikipedia, has begun to openly invite corrections and contributions to its entries.[xii] Although the Encyclopedia's editors retain the prerogative to accept or reject any of suggested changes, this indicates an important shift in that corporation's cultural mores. An entity that began in the 1700s has embraced a form of "open innovation" (what the computer generation refers to as Web 2.0).
Such change is surely reason to wonder if academia is willing to embrace similar behavior. Are U.S. universities bold enough to create a 2.0 campus culture of innovation, centered on externally focused research and open collaboration, and grounded in the needs of our consumers and constituents?
I think that any person or entity that professes to have and distribute knowledge will need to embrace a form of open innovation to remain credible and current. This is an interesting reality for many in higher education, who value "academic freedom" and the free and open sharing of information (including peer review), yet who in many ways are themselves not adept at seeking or accepting input, regardless of the source, or of making appropriate adjustments in a timely manner. Likewise, open innovation also will pressure industry innovators, who will need to look outside of their own organizations to keep pace with the speed of discovery and progress.
I will be the first to openly admit that, thus far, our nation's universities have not redefined and restructured themselves to sufficiently facilitate discovery to innovation in today's economic, technologic, and social environment. There are, of course, fine examples of innovations within universities (MIT's Media Lab comes to mind), but as far as entire universities are concerned, I have noted that only Arizona State and The University of Akron are actively reaching into that larger space. Nevertheless, I think we have capacity to adapt. If a 300-year-old compiler of knowledge, Britannica, can embrace an emerging model of collaboration based on public faith, surely innovative higher education research institutions can as well. Perhaps, an appropriate first step would be the creation of an open Wiki for specific human and world conditions, with the elite scholars, scientists and engineers from both industry and academia participating as well as anyone who can provide reliable information. Just a few years ago, a process now known as the Copenhagen Consensus provided yet another example of harnessing the power of global innovation for the world's major problems (see www.copenhagenconsensus.com )
5. Intellectual Property and Technology Transfer
Let me begin our discussion by sharing three useful maxims often used by practitioners of technology transfer:
I share these with you because simple language almost always conveys a great deal more than the convoluted legal arguments that often plague any discussion of technology transfer and negotiations of intellectual property. Thus, the contact sport metaphor implies that a good network of connections is necessary within the industries and markets wherein a new technology might be licensed or commercialized. The reference to no guarantees is a simple statement that when a new technology is being initially marketed, it is often impossible to quantify its value. Likewise, even for exceptionally exciting technologies, the market might not be ready or, in the hands of poor managers it may never get off the ground. Finally, every deal is its own deal conveys in simple language the flexibility that a great many transactions require - it tells us that if anyone insists they will do a deal only with a large up-front payment, they probably do not fully understand what they are doing.
Any company or university should be able to participate in model strategic partnerships that are mutually beneficial through the exchange of comparable value. By comparable value, I do not mean only money, because other commitments, such as the exchange of personnel, research commitments and other reciprocal agreements can bring comparable value to both parties. Strategic partnerships, in which mutual interests are satisfied, hold great promise.
Yet, industry has begun a disconcerting campaign to gain the maximum access to university work for less than comparable value. Their efforts and sweeping statements often leave you false impressions and have led to confusion as well as Congressional hearings.
The complaints leveled by industry tend to focus on three things: (1) the slowness of negotiating agreements and on two particularly contentious issues, (2) intellectual property rights and (3) third party access to the research information that has been supported by a company.
More recently, some companies are telling us and Congress that international universities are much easier to work with. They also suggest that foreign institutions are willing to grant university IP rights to the company sponsor without license commitments and that they are willing to limit third party access to research. Some companies allege that U.S. universities insist on these things because of provisions in Bayh-Dole.
However, as with the long-established and close relationships between universities and companies in the US agriculture and manufacturing industries, some countries (such as Argentina) have strong traditions of having universities work closely with industry. They have special, regular forums in which faculty come together with industrial partners to technologies of mutual interest. Thus, it is no wonder that many American companies find it easier to work in those venues. Elsewhere around the world, what companies are not telling us is that the likely reason they find it "easier" is that other countries and their universities do not have established frameworks for negotiating IP. In that environment, companies can cut just about any deal that they want with individual investigators, departments and institutions that are hungry for whatever support they can get. That, of course, is what the U.S. had in the early 20th Century and which is still reflected in the myriad consulting agreements that many faculty engage in surreptitiously or without full disclosure. Industry leaders clearly have unfair expectations if they believe that U.S. universities will readily forfeit the comparable or potential value of their IP or if they believe that international universities will long continue inefficient and financially detrimental practices.
In this regard, I would note that a 2003 PCAST report on technology transfer had important recommendations to advance the understanding of Bayh-Dole and the practice of technology transfer. Also, the Kauffman foundation is suggesting that the boundaries of universities and industry need to become more porous. They suggest that universities should push the volume of technology up, rather than seek the individual economic home run and we are seeing examples of this emerge. For example, Carnegie Mellon University has adopted a "Five percent and go" policy in an attempt to reduce delays and lower transactions costs.
Of course, this will continue to be an evolutionary process as universities and industries continue to adapt, both to each other and to the practice of technology transfer. Universities are comparatively "new" to the world of economic development, so they need to be especially attuned to how much we have to learn and how much we need to do in order to bridge the cultural divide between these "two cultures".
At the very heart of IP law and the functioning of the USPTO is the premise that even while protecting IP, we should facilitate further discovery and innovation. This is worth examining fully in the National Academies and Council on Competitiveness reports on IP. It is not that the premises are wrong in law; it is that the practice of IP law has now been subverted by two things: the inability of the USPTO to appropriately examine patents and the degree to which some lawyers go to obfuscate the very thing they should be clarifying. Much more is to be gained by advancing basic understanding of the issues than by trying to defend the core mission of the academy.
Perhaps, the intellectual property system itself could benefit from open innovation. The constitutional basis for intellectual property recognizes the need to encourage disclosure of new inventions and creations. The quid pro quo of the patent system is that in exchange for making the invention public, the inventor shall be provided exclusive rights for a limited period of time. However, there are significant delays in making the inventions public with our current system. So why not consider a patent system, at least for selected technologies, that truly leads to immediate public disclosure.
Recently, a University of Akron intellectual property management class discussed the possibility of major changes to the patent system that would include disclosing all inventions publically online. The concept is that public online disclosure would clearly meet the constitutional objective of promoting the progress of science and useful arts, and could help determine inventorship, encourage increased discussion on prior art, improving the quality of patents, and eliminate some research and development redundancy as one could consider in near real-time what other experts were thinking and doing, and then build upon it. It would truly accelerate innovation.
Undoubtedly, some will object to sharing any IP until inventions are verified, protected and derivative inventions are considered. However, this open innovation model may be appropriate in selected technology areas. The public good of early disclosure and its impact on innovation, may out-weigh the costs associated with loss of proprietary position in some circumstances.
One important element in our technology transfer discussion lies in our failure to tackle the optimization of our education system. Indeed, if the often quoted suggestion that 95% of all technology transfer takes place as people move from college into the workplace or from one company to another is true, then why do we seldom include this in our technology transfer discussions? Thus, I suggest that close relationships between business and universities are the first step in a talent supply chain optimization.
As I suggested earlier, our methods of education have developed at an extremely slow pace when compared with virtually all other value-producing endeavors. Indeed, despite the fact that the first responsibility of every university is that of educator, we devote precious little attention to research designed to demonstrate what works educationally. Do we hear anyone clamoring for evidence-based education? They do for evidence-based medicine!
This disconnect can perhaps be expressed if we look at how companies have optimized nearly every aspect of their supply chain. Through what I refer to as the Wal-Mart effect, large multi-national corporations have achieved unprecedented profits through systematic partnerships with suppliers. Industries have specs and standards for suppliers of goods, as well as ISO 9000 and 6000 standards of performance. Business has squeezed almost every ounce of efficiency out of managing time, raw materials, quality, price and performance and they have the data to prove it.
There is paradox and irony here: How do we reconcile industry saying that workforce is its highest priority with its apparent inability to optimize its talent supply chain asset?
In much the same way universities harp on about the importance of well-prepared students but fail to sufficiently leverage its relationship with K-12, industry says workforce is its number one issue, but doesn't pay the same attention to its human capital supply chain as it does to the supply chain of materials and components.
"Business" partners with "business" to improve the transfer of goods, but it fails to adequately partner with universities to facilitate the transition of students into the workforce. Indeed, there are few specifications for what industry expects from the droves of individuals entering the workforce each year.
In case you find yourself being skeptical about my comments on the talent supply chain, please remember what I said earlier - it is estimated that 95 percent of technology transfer happens when people move from universities into the workforce and then move from one job to another. Since companies spend an average of $1,000 per year per person on enhancing the skills of workers, you can understand that our economy could save about $150 billion dollars and increase its return on investment by as much as an order of magnitude by managing the talent supply chain as diligently as the supply chain of materials and components.
Thus, I suggest that it is the responsibility of universities to develop a serious academic approach to the concept of talent supply chain management.
Let me conclude our discussion on IP and technology transfer with a brief discussion on conflicts of interest and/or commitment. Let me assure you, first of all, that I am not opposed to the many fine protocols and frameworks which we have developed to deal seriously and responsibly with these issues. However, what would happen if we came at some of these questions from a positive perspective? Indeed, shouldn't we be looking for a "confluence of synergies"? Pete Kissinger, CEO of BioAnalytical Systems used to quip: "No conflict, no interest; no interest, no commitment" precisely to focus our attention on some of the inherent ironies and inconsistencies when dealing with this topic. I suggest we all would be better served by a comprehensive re-examination of these issues, starting from altogether different assumptions that could facilitate synergies among potential partners.
6. Models that Work
Last night, we heard a fine talk by my former Purdue colleague, Marie Thursby, who is now at Georgia Tech. In a 2007 paper on "University Licensing" she and her husband, Jerry Thursby concluded that the recent rapid growth in licensing creates a misleading picture that does not account for vast variations in licensing success among universities, scientific fields and technologies. The paper points out that many universities do not make money on technology transfer. In fact, the bottom 25 percent of universities reporting to the Association of University Technology Managers bring in less than $360,000 per year in licensing, while spending as much as $213,000 on legal fees alone. The notion that universities are willing to lose money on the tech transfer process indicates that other motives, such as a desire to see the technology developed in our labs commercialized, may direct university decision-making when it comes to research.[xiii]
Of additional interest, their research found that 74 percent of the inventions licensed by universities were in the proof of concept or lab-scale prototype phase, while less than 12 percent of licensed inventions were ready for commercial use. The early-stage inventions that were licensed were often deemed risky by corporate partners because their higher failure rate is so well documented.
The Kauffman Foundation's Christine Gulbranson and David Audretsch assert that university research does not "passively spill over" into industry for commercialization and thus an institution is needed to move research beyond its early stages to create innovation and economic growth. In an article titled "Proof of Concept Centers: Accelerating the Commercialization of University Innovation," they advocate for a center that offers seed funding for novel research and connects mentors from industry to the university's labs.[xiv]
One example is the von Liebig Center at the University of California San Diego Jacobs School Of Engineering, which states that its mission is "to accelerate the commercialization of UCSD innovations into the marketplace, foster and facilitate the exchange of ideas between the University and industry, and prepare engineering students for the entrepreneurial workplace." Founded in 2001 through a $10 million gift, the center has offered seed funding from $15,000 to $75,000 per project to 10 to 12 researchers annually to evaluate commercial potential, develop, test, prototype or conduct market research. The center also offers advice from six part-time advisors with strong connections to industry, as well as incubation space and events that introduce researchers to local industrial partners and angel funds. The concept has proven successful, leading to the formation of 16 startups, the execution of four licenses and the attraction of $71 million in follow-on funding.
Similar efforts include Purdue's Trask Fund, Illinois Ventures, started by Jim Foght, and ours at The University of Akron to which I will return shortly. All share essential strategies, including collaboration with external groups, willingness to be creative in transferring technology and a connection to the local venture capital and industrial community.
Let me spend a few moments sharing some exciting work that truly demonstrates how we can innovate on innovation. Gary Markovitz, founder and CEO of Innovation Business Partners, has shown a true recognition of the wide variety of sources from which solutions can come in his work with industry and with the U.S. Navy. Gary developed software that improves the hit rate of patent database searches, allowing his clients a more effective snapshot of the research landscape in which they are working. And his work goes far beyond mapping existing technologies. Gary encourages clients to look at all possible solutions to their problem, often leading them to combine multiple technologies in widely disparate fields to create an entirely new product. In a benchmarking study with the Office of Naval Research, Gary's firm demonstrated the ability to increase the rate of invention of Navy researchers by 50- to 100-fold and shave years off the R&D cycle-time while reducing costs by millions of dollars.
One of the challenges to be addressed was corrosion, the single largest maintenance issue for the Navy. The group focused on corrosion of pipes and using a four-part problem definition process created an understanding of the challenge that redefined the problem and enabled them to mine the patent database for elements of a solution. They then used the company's IP Driven Brainstorming process to generate alternatives. Ultimately, the team combined elements from two Danish building patents, a diaper patent and an aortic heart pump patent into a solution that they are now working with a vendor to produce.
In 2004, Innovation Business Partners was engaged again by the Office of Naval Research and Marine Corps to demonstrate a new form of R&D called Connect & Develop, which enables the Navy and Marine Corps to leverage and benefit from the trillions of dollars spent worldwide by OECD nations on research and development. It demonstrated the ability to deliver solutions to our troops in less time and at lower cost.
For example, during the pilot an urgent request was received to identify alternative technologies for up-armoring vehicles in the field. Within 24 hours using the AkribisTM data mining technology, Gary's team identified technology and products developed by six private companies and results of an Army research group that the requestors were unaware of.
Another challenge related to the Navy's EA-6B reconnaissance plane. The problem was to equip the flight crews with technology that would allow them to spot ships, even small fishing boats, at night while at altitude and full speed. The technology had to be handheld and not require any modifications to the aircraft. Mining the patent database, Innovation Business Partners created a Solution Space Map that identified nine companies with technology and six products, two of which had already been flight certified by the U.S. Air Force.
Finally, the two Marine Corps teams involved had a totally different type of challenge: defining R&D investment strategies for future head-borne systems and technologies that would allow soldiers to see through walls. Using the four-part problem definition process, AkribisTM data mining and Solutions Space Mapping, they were better able to assess the state-of-the-art and identify new intersections of disparate technologies that led to redefining their investment strategies. In addition, the Solution Space Map identified the technologies, companies and inventors that were the ideal candidates to include in their "Innovation Grid" that will deliver the solutions. Management at the Office of Naval Research called the results "incredible" and "outstanding."
Universities, and indeed all groups that conduct research, can learn much from Gary's work. Too often, we ignore the wide body of existing research, failing to fully benefit from the hundreds of thousands of patents issued each year. By neglecting to notice the developments occurring around us, we duplicate work or miss valuable opportunities.
7. The Polymer Industry and The University of Akron
At The University of Akron, we like to say that we create "the new materials for the new economy." This is a double entendre that refers both to our internationally recognized excellence in polymers and materials engineering and to the students, inventions and products we create for the benefit of our regional economy. And I think that a strong connection to industry and a deep understanding of our roles in our innovation ecosystem will allow us to optimize the transfer of these "materials," increasing their impact on our economy.
I need not tell you that there are myriad university models for economic development: research parks, venture funds, urban redevelopment programs, small business development centers, industry collaborations and research consortia to name just a few. And surely you know that some universities are far more successful than others in creating and supporting strong and vibrant economies.
In our case, The University of Akron has become particularly successful in providing added value to industry by linking resources and by developing and commercially exploiting technology. In fact, an NSF-supported study released just a few months ago identifies The University of Akron and nine other smaller and medium sized research institutions as exemplars for technology transfer, commercialization and industry partnerships. Thus, I thought I might share just a few of the projects currently underway at Akron.
Founded 138 years ago, in 1870, The University of Akron grew up alongside the rubber industry that emerged in Akron that same decade. It offered the world's first academic program in rubber chemistry and continued to shape its R&D interests alongside those of industry. Today, The University of Akron has the largest and best-known academic center focusing on polymer science and polymer engineering--areas in which we compete and collaborate more effectively than better-known universities.
Decades ago when tire manufacturers dominated Akron's corporate landscape, we simply accepted that each company would conduct its own isolated and secretive R&D, even if this meant they had to independently reinvent the wheel to tackle each new research challenge.
Today, Akron corporations have become more focused on how companies can work together to advance the economy of the entire region. This does not mean that competition ceases to exist; merely that the growth of profits is not necessarily a zero-sum game. Large corporations have access to markets, suppliers and customers that universities and smaller corporations can barely dream of achieving. Our corporate partners also have knowledge of market needs and demands bred through years of serving consumers around the globe. Small companies and universities have new products and inventions, quick processes of development and testing, and faculty and employee expertise that can help to address industrial needs. At times, this research is done without industry's guidance and later licensed through the open channels provided by the Open Innovation process. Industry may also communicate its needs to those who can help, even providing the funding needed to seed the invention process. With all of these opportunities for collaboration, universities would be falling far short of upholding our role in the innovation ecosystem by allowing technology to remain on the shelf. Unfortunately, failure to commercialize occurs all too often.
Notably, The University of Akron's intense focus on polymers has enabled us to take significant leadership among our industrial partners. The University has taken leadership roles in the formation of an industry association, Polymer Ohio, Inc., and an industry-led public/private strategy council that advises the Governor of Ohio and the Ohio Department of Development, The Ohio Polymer Strategy Council.In the context of this major polymer industrial cluster and its interrelated historical context, the university has called for a bold commitment that signals strategic intent by undertaking four major initiatives:
First, we have initiated a plan to double the size of our R&D base in polymer science and polymer engineering as well as to make investments in chemistry, physics and biomedical engineering.
Second, we have formed a Global Polymer Academy, leveraging our own strength in distance learning technologies and our close association with the Rubber Division of the American Chemical Society. It uses automated broadband technologies in synchronous and asynchronous modes and is linked to major industry sites around the globe.
Third, we are creating an industry-led, but university-managed and university-situated National Polymer Innovation Center (NPIC). The NPIC will house talent in basic and applied R&D to focus on small- and mid-sized polymer processing companies as well as on the development of valued-added products and opportunities.
Finally, we have initiated a significant commercialization engine: The University of Akron Research Foundation - consisting of our own technology transfer personnel coupled with our programs in intellectual property law, science, engineering and business. The non-profit University of Akron Research Foundation is a model for working flexibly with industry and establishing long-term relationships that lead to future opportunities. It has achieved success through the efforts of an impressive team of professionals who understand and appreciate both the academic and commercial worlds, including George Newkome, Ken Preston and Wayne Watkins. Please feel free to come to Ohio and spend time with us; we'll learn much from each other, I am sure.
Examples of the interesting things that this is enabling us to do are the following: First, as industries adjust their talent and space utilization needs, we are managing their vacant space to accommodate incubator needs of new start-up companies and expanding research programs. Likewise, we are consolidating industrial research equipment within our own facilities. We are assembling technical libraries, allowing us to expand our holdings as well as to manage the holdings of industrial partners. We also are managing industrial talent and providing industry with the equivalent of academic research and teaching assistants--namely, industrial assistants. Finally, we are exploring strategic partnerships that tie our research activities more closely with those of industry as well as partnerships that enable bundled intellectual property portfolios to create new enterprises that benefit industry and the university. And we have started and angel investment network, ARCHangels, and an entrepreneurial Guerilla Ventures enterprise group.
Ladies and Gentlemen, the task before us is not easy. The innovation ecosystem is a complex and interactive one that grows larger and more intricate with every day.
We must be committed to innovate on innovation. . . to focus our entire society on innovation.
Perhaps, as we do in most aspects of human affairs, we simply must be committed to muddling through, so . . .
Be cheerful, and plunge ahead!
[i] Bloch, Erich (1996, September 27). Cooperation, Competition, and Science Policy. Science, Vol. 273 (no. 5283), pp. 1779-80.
[iii] National Science Board (2008, January). Science and Engineering Indicators 2008. Arlington, VA (NSB 08-01; NSB 08-01A).
[iv] National Science Board (2008).
[v] National Science Board, Science and Engineering Indicators 2004 (Arlington, Va, National Science Foundation, Jan. 2004) Volume 2, p. A5-17.
[vi] National Science Board (2008).
[vii] National Science Board (2008).
[viii] Darrel Rigby and Christopher Zook (2002, December 3). Manager's Column, The Wall Street Journal, p. B-2.
[ix] 1998 Technology 21 Report of the State of Pennsylvania, http://sites.state.pa.us/PA_Exec/DCED/tech21/newframe.htm
[x] Federal State Cooperation: Improving the Likelihood of Success, 2004.
[xi] National Science Board (2008).
[xii] Nickisch, Curt (2008, June 18). Britannica Lets Online Visitors Suggest Revisions. NPR Morning Edition.
[xiii] Thursby, Jerry G., Thursby, Marie C. (2007). University Licensing. Oxford Review of Economic Policy, Vol. 23(no. 4), pp. 620-639.
[xiv] Gulbranson, Christine, Audretsch, David B. (2008). Proof of concept centers: accelerating the commercialization of university innovation. The Journal of Technology Transfer, Vol. 33 (issue 3), pp. 249-258.
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In his 13th State of the University Address, Dr. Luis M. Proenza reviewed the accomplishments of the past academic year and decade, and discussed the challenges and opportunities inherent in the disruptive changes occurring in higher education today.
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