The Press, November 2010
We pride ourselves on New Zealand being an ideas factory, but its output seems too often to fall off the conveyer belt and smash on the floor.
New Zealand’s failure to commercialise enough of our good ideas i.e. the new products that come out of our universities, Crown Research Institutes (CRIs) and even private companies is a lost opportunity for the country, and one we are not close to solving.
Think-tank the New Zealand Institute says New Zealand “has a relatively poorly performing innovation ecosystem.” I’m not sure exactly what that means, but I think it is economist speak for ‘we are not finding enough profitable markets for our new product ideas.’
The government’s response has been simply to ramp up the ‘ideas conveyor belt’, without really addressing the problem of the ‘products’ smashing on the floor.
Various initiatives and funds have been announced to improve the ability of our economy to turn research ideas into commercial gain, but the problem is that they encourage ‘ideation’ rather than ‘commercialisation.’ As a country we are simply too invested in ideas, too inclined to think a brilliant invention will take over the world.
As business author Rob Adams says "Good ideas are dime a dozen. The idea does not have to be unique. The idea itself is really not that big a deal."
Customers, at least the majority of them, don’t want to buy a clever new idea. They want a complete solution to their need for a reasonable price.
In my industry, the technology sector, the supremacy of the idea is often overstated. The industry is littered with great new technologies that never went anywhere. Ideas that failed as soon as they hit the reality of the market.
At present too much of our institutional approach to commercialisation is looking at the wrong end of the process.
Commercialisation is not about taking clever ideas out of the universities, the CRIs and the hospitals and selling them to world markets. Real commercialisation is about identifying opportunities in world markets, bringing those back to New Zealand and getting our genius engineers and technologists to develop solutions.
“Research organisations and start-up businesses usually have limited funds and plenty to do so there is an understandable temptation to get on with completing the research and developing the offer so revenues can be secured sooner, and before funds run out,” says NZI’s Dr Rick Boven in a paper on our innovation system.
Coming from the market in, rather than the innovation out, ups the rate of success and lowers the cost of research and development.
What typically happens with research ideas built from the inside out is that once they encounter a real customer, they need a lot of adjustment to make them work, or the barriers to selling them profitably are just too high.
Does this mean we should throw out the hundreds of new product ideas already underway? Of course not, but we need to bring a dose of customer reality to the development process.
Our success rate from government funded research is poor because the process is not market-oriented enough. The barrier for getting government research funding is set too low, with too little evidence required to prove that there is a real customer need, a clear path to market and an opportunity to build a premium price position.
In Christchurch, the Canterbury District Health Board and Canterbury Development Corporation are setting up an innovation hub. It’s a good concept – trying to use the smart people and ideas within the hospital system to create profitable products that can offset the huge cost of healthcare.
The hub will be destined to fail if it simply takes clever ideas from surgeons to market, as many medical distribution companies have found out in the past! So much about the market opportunity needs to be clear to make it work.
What are the best segments i.e. ones where medical innovations from New Zealand would be seen as credible? What are the main medical trends in those sectors and how do our ideas match? What sort of training and procedural change would be required for a customer to adopt this idea? Have we got some credible clinical leaders to use in this market? What distribution model would work – could we partner with one of the multinationals to help them upsell their products? Or should we use a smaller, independent distributor?
The market side of the equation is equally as hard, if not harder, than coming up with and developing an idea. It is something that needs as much process, commitment and talent as being innovative.
Our current approach to commercialisation treats coming up with the idea as 90% of the task. We need to develop a new model for commercialisation in New Zealand. It needs to reflect the fact that simply producing ideas is less than half the task. The remaining effort is ensuring those ideas are matched to customer needs and an effective system is built to get them to market.
Getting it right will avoid the tragedy of new product ideas from hard-working and brilliant innovators from crashing on the hard floor of market reality.