Source: Gilad Lotan https://www.flickr.com/photos/giladlotan/5108589192/
Business 2.0, Design

Startups vs. research for innovation

We recently saw Australia’s leading political parties exchanging policies to out-fund the other in relation to spurring “innovation.” By and large, I think this is good thing, and a refreshing change to focus on ways forward and the future, rather than on who might come in or out of the country, and one whose terms.

During these announcements, Labor put forward their policy position which included regional hubs, to be delivered through educational institutions such as universities and the idea of a “Startup Year” for students.

Around that time, Steve Baxter from River City Labs1 and Shark Tank, took to BRW to argue the case to Fund accelerators, not just universities.

I can’t say I disagree with the overall sentiment of Steve’s piece, but it did cause me to take pause and think a little deeper about the role and relationship of startups and university research.

In the article, Steve notes:

These examples show that we don’t need more university-based projects funded with taxpayers’ money that are not bound by market forces for their ongoing success.

What we do need from universities is for them to produce a lot of really technically capable and entrepreneurially enthusiastic young people with a burning desire to start something and really give it a crack.

I note in the recent Startup Muster report that a majority of respondents had a graduate degree, with the highest proportion having a post-graduate degree (and, I suspect, a number of those post-grad degrees would be research based). Another part of that report notes that exposure to other startups was a key driver for someone launching their startup.

This raises a few questions for me:

  1. Wouldn’t having university based incubators help achieve this goal of more startups, by creating incentives to “give it a crack”?
  2. Wouldn’t developing startup skills at university (if done well) help improve the likelihood of success in new ventures—either at the time of graduation or later on?
  3. Wouldn’t investing in incubators expose university students, and the universities themselves, to market forces earlier, helping to drive research towards more commercial outcomes?
  4. The proposed funding was to go to establishing hubs in locations that a) are not already well serviced, b) likely have limited appeal to commercial incubators, and c) where universities have an existing investment in infrastructure. It seems like this would be a good outcome in terms of inclusiveness?
  5. And lastly, if universities don’t have compelling research projects, are they going to be able to achieve this objective?

Earlier in the article, Steve notes:

Startups, by nature, get a lot of stuff wrong. As an investor I know – boy do I know it. People who found them start with an assumption, build a prototype and test it in the market, research their assumption with customers, and if they realise their product isn’t delivering, they typically cop it on the chin and move on to building their next one.

And who’s to say that is a bad thing? How much time do we really have to waste on lost opportunities and money before we accept something just isn’t working?

This latter statement was intended (to my reading) to be about the overall funded university research model. And it’s a valid question.

In this day and age of the “lean startup” you could be forgiven for thinking that a new innovation can come about in a matter of weeks or months. There are a number of technological innovations that wouldn’t exist without pre-cursor research that was non-commercial in orientation. But what of the opportunities that require longer-term investments to prove and develop to “market readiness”? Where the scale is in years before a technology or approach comes to fruition—with reductions in costs, increases in technological performance, and absolutely a degree of entrepreneurial spark.

I concede that the current state of culture within many universities isn’t necessarily the most obvious/conducive environment for instilling/promoting a culture of innovation. But at their best they are certainly capable, they have good access to raw talent, and there are strong potential benefits.

That is to say: startups are not the only source of innovation, especially those that require a degree of “patient capital” that is not dependent on a short-term return.

So to dismiss university research out of hand, to say that it isn’t an important part of the mix in the entrepreneurial ecosystem, is perhaps unwise.

In a recent blog post, lean startup advocates Steve Blank & Evangelos Simoudis argue that connections to academic research are an important “early step” in the formation of innovation capability for businesses wishing to establish “Innovation Outposts”.

In addition to getting plugged into the ecosystem’s network, the first role of the Outpost is to partner. These partnerships may take the form of Proof of Concept projects with startups, getting to know VC firms and their portfolios, and familiarizing themselves with university groups doing research in the established strategic problems. (It may invest in a few startups in this Stage but that’s not the goal.)

For example, one of the big strategic problems a corporation may want its Outpost to solve is to connect the company to the leading PhD and faculty in specific departments at Stanford and Berkeley. A Stage 1 Outpost could partner with universities to set up a “Post Doc” center focusing on the strategic problem.

I recently was inspired by Neri Oxman’s talk about the intersection of technology and biology.

In the talk she demonstrates how the researchers and students she’s working with are on the bleeding edge of new technology development. To some, the perception that there isn’t an immediate commercial application to this sort of technology may fall into the realm of what Steve is arguing here: why should this be funding. But watching that talk, I hope that the possibilities are self-evident, and that it is supported and recognised for the innovation potential it holds in the longer term.

I also think about the rapid advancement towards robotic systems—automated cars, drones in agriculture etc. While there have been some significant (and rapid) advances spurred by investments and development at companies like Google, much of the preliminary work that made this possible would have been through government funding (esp., in this case, from the defence departments).

I think about my own work into sustainability and behaviour change and how much it has been informed by academic research—where researchers are enabled to ask the questions that startups can’t afford to—about human psychology, behavioural economics etc. These books and this understanding is not primarily being driven by commercial enterprise and investment. (Mind you, it would be great if it was!)

Just off the top of my head (and from memory), GPS and wifi are just two general purpose technologies that didn’t spring up out of “startup land”. Of course, internet itself was born out of academic enterprise. And think of the benefits of medical research—for better (and sometimes worse) the medical industry is intertwined with academia.

So while I agree we need more and better mechanisms to spur entrepreneurship in this country, it shouldn’t be at the expense of quality research within academia.

I know there is a lot of wastage of capital in following or seemingly irrelevant unfruitful paths, but this is not restricted to the academic sector. We should absolutely look for ways to minimise this wastage and funnel resources to promising and effective ends2. Assuming that one mechanism for learning/innovation (startups) is inherently better or more suited than another (academic research) is to miss the important interplay between the two, and the synergies and similarities between approaches.

All of this is to say, the title of this post is deliberately provocative. It is not a “versus” game. For me, it’s more a question of how can we take the best of both worlds and harness them to achieve positive outcomes?

Image credit: Gilad Lotan: “I love Neri Oxman’s work”

Footnotes

  1. It’s worth noting that, to my reading, Steve’s organisation River City Labs would not be eligible for such funding, so it’s worth bearing this in mind while reading Steve’s comments
  2. As Steve notes, sometimes experiments fail. Sometimes those failed experiments lead to new insights, and ultimately the innovation that does succeed. It’s arguable that many startups don’t “fail informatively”—i.e. in ways that the broader community can learn and build upon. How many startups are borne of the same idea as a failed startup before it? At least with academic research there is a degree of due diligence required (e.g. in the form of literature reviews etc.) before research commences. And there is a mechanism for sharing learnings, including failures (e.g. published research findings) that, at its best, create the conditions for further innovation out of failure. (I should note there are many aspects of the academic reward and publication system that I disagree with. My point is that there’s an in-built mechanism for this model of dissemination of innovation that is not inbuilt in the startup ecosystem.)

Also published on Medium.