I was talking to Doc Hall yesterday about innovation, partly about how to frame an article about the subject for Target and partly digressing about the state of manufacturing and business. Doc thinks the way we do business is rooted in the past and about to crumble as the cracks in the foundation grow wider.
Innovation, for example, is hampered by patent processes and the extensive litigation often rising around them. Another barrier to innovators, he says, is that they may be brilliant at science and technology, but they don’t know how to create a business model that can succeed in the marketplace. You need both. Then licensing innovations by companies who can take an idea to market is made less attractive by inventors who offer only nonexclusive licenses to their product or technology.
Nathan Myhrvold, former Chief Technology Officer at Microsoft, along with some partners, founded a new company, Intellectual Ventures, betting on a new model of deploying innovation. He describes this in an article, “Funding Eureka,” in Harvard Business Review (you can download it from the IV home page). He foresees making a market in invention, liberating it from “charity funding” from the government and even from corporations that are more interested in development than research. He’s assembled (if I didn’t get this wrong in my quick scan of stuff) $5 billion to buy a portfolio of patents that has already generated $1 billion in licensing revenue. His plan gives me nightmares of selling shares in targeted portfolios that average out risk, then some financial innovator making a market in derivatives, the question of who rates risk, and a debacle like the mortgage-backed securities and their derivatives we’re still recovering from.
Another company that’s been working for the past several years to make a market in innovation is Yet2.com, led by Ben DuPont. (Yes, he’s one of those DuPonts, with business development expertise gained from work he did there. Could a trait for commercializing R&D be in the family genome?) Yet2.com is an online registry of technologies available for license, combined with “Tech Needs” from companies looking to buy innovation instead of making it or looking for a solution to a technology problem. One of the company’s innovations is a standardized “Tech Pak” that makes it easy to get the gist of what’s on offer by an inventor, what stage of development it’s at, and what research data comes with the license. DuPont and other colleagues are also starting to invest in promising innovations to bring them to market by adding their business acumen to research brilliance.
NASA Tech Briefs is a publication with a long history of trying to offer innovation produced by our tax dollars to private enterprise. It now has struck a deal with Yet2.com so that its database runs in the Yet2.com framework behind the Tech Briefs web search interface. You also get the NASA technologies through Yet2.com.
You can also troll the filings in the U.S. Patent Office if you’re of a mind to. It’s all online and there are, no doubt, intelligent bots constantly spidering the website for the benefit of anyone who wants to buy or sell innovation.
These are just a few models of market innovation in innovation. Much is driven by big companies, whose financial wizards are looking at intellectual property as a collection of assets that can be “monetized.” Corporate research often turns up a promising project that just doesn’t fit their core business. Until recently, those patents, data, and even business plans have sat fallow in the vault, with no ROI, but protected from competitors wishing to bring the same idea to market. They’re asking why, and answering, why not earn some money from them?
There are also the little guys, inventing a product they believe in, but not having the resources or knowledge to take it to market. TV is full of reality shows that put inventors into competition with one another for the chance to pitch their ideas to people with money. Some companies are starting to follow the online communities that are emerging among inventors, but it really remains small potatoes and a field for all sorts of “services” to offer would-be moguls.
I have a few questions. Where’s the opportunity for lean companies freeing up capacity or lean experts who are now free agents to mine these innovation resources? If they don’t have the resources for R&D, can’t they just buy it in the new innovation market? Can they base an entrepreneurial start-up on someone else’s innovation? Would they even want to? I’d hypothesize that they ought to have an advantage over non-lean entrepreneurs, even if they invest in nonexclusive licenses.
These models all seem to fit into the emerging philosophy of Open Innovation growing out of the open-source software movement. How will it take shape? How is the money going to flow?
Food for thought.