Why the Discussion about Commerce in Innovation Mustn’t Be All about Start-Ups

Lately it seems every time I’m around a conversation about making the most of innovation, in no time flat it will transform into a soapbox about start-ups. Start-ups not being properly funded, the need for more start-ups, someone making a motza from a start-up. Granted, that is due in part to the fact that I’m currently developing a course called Conversational Commercialisation. And in part its probably because since I started Your Commercial Foundations (YCF), I’ve been practically chanting “Commerce is more than Commercialisation”, but Conversational Uptake just isn’t as catchy, so I’m irritated by my own shallowness the whole time I’m writing.

But that still leaves a large part that has everything to do with the broader shallowness that seems to fixate so many in the knowledge industries on the seemingly big bucks that commercialisation-through-start-up seems to promise everyone if only our innovation system would function optimally. 

In the early days of YCF, I was struggling to find the right analogy to build on the innovator-as-traveller concept with which I had become so enamoured. If you’ve watched the videos on the website or Vimeo, you’ll know I settled on a stereotype (and if you haven’t, yes it is a little amateurish, but I prefer “charm”) – just as there’s more to France than berets and baguettes, commerce is about more than commercialisation. And there is.

The truth is that innovation is broader than creating a product for a market, and equating uptake primarily with the principles of narrow commercialization – despite its trackable statistics and promises of riches in return – is robbing innovators, industries and ideas of the full impact of the best resources we have to offer.

I did a series of posts  last year that explored why the public sector invests in innovation and the answer is because, like any investor, it believes not only that it will receive a return on that investment that will be at least as valuable as any other use to which it could put that funding. The return that they are seeking is the increase in the economy as a whole that comes primarily as a knowledge spillover from uptake of innovations. These productivity improvements enable the entire economy to produce more output from the same amount of inputs, increasing everyone’s standard of living through more jobs, more services and more innovation.

Productivity improvements do not come from a small number of successful spin out companies increasing to a slightly larger number of companies.  Productivity improvements, particularly in an economy with so many researchers embedded in the higher education sector, need to come from upskilling those researchers, from addressing the disconnect between industry and academia and from increasing the number of researchers who even consider aspects of commerce throughout their research, rather than as a final activity to be considered when one has a research outcome and is looking to make some return from it.

Don’t get me wrong – I love start-ups. I’d love to see more of them, particularly if with the increase in volume comes an increase in their ability to succeed, but that won’t come just because there’s more willing entrepreneurs or more investors/money to support them. Funding is not a solution or a strategy; it is simply a tool. And with all due respect, we have plenty of those running around our industry already.

Yes, that’s probably unfair, but I’m so over the endless, ill-informed and underprepared rush to push an idea into industry or a corporate structure without equipping it with business smarts to match its technical excellence.

The report from The Allen Consulting Group’s 2010 survey of Australian employers of researchers suggests Australia’s tertiary science graduates are currently well trained to become specialized or experts in their area of research, but face limitations in workplaces where they are called on to step outside the confines of pure research work.  Its authors posit that, “As the characteristics of research work becomes more complex, involving multi-disciplinary approaches, collaborative project-based teams, and different funding sources, the requirement for communication and other soft skills increases.”

Why is it that we are smart enough to embrace the reality of a systems approach to research, of the benefits of a multi-disciplinary approach, but fail to grasp that commerce is both an integral part of the system and a discipline in its own right? As causal a factor to success as to failure, and at least as potentially disruptive as any other source of knowledge?

It is worth noting that the Organisation for Economic Co-operation and Development (OECD) survey of seed and early stage funding of start-ups in 2012 found that “many programmes, especially publically funded ones, focus solely on sources of finance and presentation skills, not on the more pertinent business issues which are the determining factors for whether or not investors are willing to provide funding.”* It further noted that programs that help entrepreneurs better understand the expectations and needs of investors and prepare themselves accordingly can result in greater success in securing funds.

Moreover, developing one’s plans for business (as opposed to producing a glossy document called a business plan) to a level which will answer the most pertinent questions for investors – about business models, skills balance within the start-up team, and business development, for example – will also improve the likelihood that the business can successfully function, independent of the question of availability of funds. Which, given that in the US the percentage of start-ups that fail has been reported as upward of 75%, can’t be a bad thing.

There are a variety of programs that purport to cater to innovators and potential entrepreneurs who want to bring their ideas to a wider audience, an audience that is vital if, as a nation, we are to begin to realise a greater return from our investment in the raw material of innovation. What we are missing, what we have been missing throughout the years of policies that focus on dreams of short-term material gains from licensing and IPOs and competing universities, is that we have a generation of graduates with limited if any exposure to fundamental commercial concepts. Almost all of the programs in existence are founded on an applicant identifying a potential product or market – at the very least, an opportunity – but without an understanding of commerce, this in itself is unreasonable and potentially self-defeating.

The challenge may well come from the seemingly inextricable link the higher education sector seems to be making between “industry engagement” as an emerging activity and cuts to funding for the higher education sector. It has an uncomfortable resemblance to the response to increased focus on commercialisation at the beginning of the noughties, to which universities responded by instituting Key Performance Indicators into contracts of all levels that expected immediate financial returns and revenue sources from academics with limited if any instincts let alone training in commerce, which hamstrung collaborative contract negotiations with competition to own the potential of potential intellectual property rights.

Rather than building specialist skills in one form of skills set or uptake method, innovators need to develop broad commercial awareness and skills that will enhance their ability to produce world-class output that is of value and relevance to their end-user, whether that end user is in industry, academia or social impact. Because there is nothing worse than a dream that dies without ever having a chance, and it is not softened by putting a corporate structure around it.

Either that, or I really need to finish developing this module….

The Allen Consulting Group report is available online at their website or via the website of the former Department of Industry.

The OECD 34 members represent all of the developed and the leading emerging economies of the world. The quote is from a 2013 report Policies for Seed and Early Stage Finance: Findings from the 2012 OECD Financing Questionnaire, which can be found online through their iLibrary.

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