Broadening Innovation

Broadening Innovation

This address was first given to the NSW Leaders Forum, October 2015

My University's last contribution to this forum was to offer an 'insider's perspective' on the barriers to collaboration between universities and the world outside academia. I spoke about the poor flow-through of research into innovative practices in business: just 7.1% of innovative firms identify higher education and government sources as the driver of their innovations according to the OECD. I mentioned our university's stake in the region and its future, particularly through the transformation of legacy industries and the growth of new knowledge jobs.

Most importantly for what I want to talk about today, I outlined the factors that determine a successful relationship between academics and industry—at least, according to the Science and Business Innovation Board. Today I want to focus on two of those factors:

  • Don't get hung up on intellectual property
  • Long-term strategic partnerships with built-in flexibility work best.

To me, these are the most important determinants of shared innovation between universities and business. It can be stated even more simply: it's about money and people. That is:

  • Who pays for the idea and how much?
  • How do you generate value that sustains a long-term commercial partnership? 

Today I will talk about Western Sydney University's experience of generating 'long-term strategic partnerships' – people; and about our approach to intellectual property—money.

Some background about Western Sydney University's changing approach and innovation more broadly. Firstly, we have re-branded: from the University of Western Sydney to Western Sydney University. While the change of name isn't dramatic, the revision of the strategic direction and messaging that underpins this change is. Our university started with a missionary culture—bringing the 'word' to the West. While we are still profoundly engaged with our region, we now know that this approach short-changed the aspirations of our students and academics. In part, we treated Western Sydney as a deficit to be overcome. We know now that the future is unlimited from Western Sydney; that the potential for success is unlimited for anyone with the drive, talent, confidence and ambition to succeed. 

A second thing worth noting is how narrow a definition of innovation we tend to rely on both within the University and outside it. We tend to focus on products. Cochlear implants. WiFi. Tesla batteries. iPhones. These things are important, but they are at a scale and cost that puts innovation on a rarefied platform.

If we think that product offerings like Cochlear implants are all that innovation is, we are effectively excluding SMEs—97% of Australian businesses are 'small' businesses—from the field of innovation.

In contrast, Doblin, a subsidiary of Deloitte Touche Tohmatsu, outlines ten types of innovation.

  • Profit model
    • Converting a firm's activities to cash
  • Network
    • Access to other firms' knowledge and expertise; the ability to share risk
  •  Structure
    • Organising hard and soft infrastructure to optimise the working environment and sweat assets
  •  Process
    • The unique way you do the work (for Deloitte, this is 'Design Thinking')
  •  Product Performance
    • New products and upgrades
  •  Product System
    • The product ecosystem—how does product integration and modularity improve competitiveness?
  •  Service
    • Enhance the utility, performance, and apparent value of an offering
  •  Channel
    • How is the product available: online, in-store? What is the customer experience of the channel like?
  •  Brand
    • Get customers to recognise, remember, prefer your product and experience
  •  Customer engagement
    • How do you improve a business's understanding of the customer and deepen the customer's connection with the business?

Doblin offers the following advice in relation to new products as generators of business success:

"Product performance innovations that deliver long-term competitive advantage are the exception rather than the rule."

So, to re-emphasise that: by focussing on product performance innovation we exclude, to an extent, SMEs, and perhaps to a greater extent, a raft of other innovative practices that could lead to improved competitiveness.  We need to broaden our understanding. Alongside tech startups and accelerators we need to place a whole range of small businesses.

My research into the motivations of small businesses, from which I built a model of five small business 'segments', suggests that there is a range of small businesses making choices about their business with differing motivations.

The upshot is simple: as Tony Featherstone put it recently in the Sydney Morning Herald, stronger connections between universities and SMEs will strengthen the economy overall.

'Helping millions of SMEs collectively become 1% more innovative would make a bigger difference to the economy than developing a small number of high-profile ventures.'

These two things, the University's rebranding to better reflect the aspirations and characteristics of Western Sydney, and knowing that innovation isn't just products and isn't just about the big end of town or a garage in Silicone Valley, feed into our approach towards sharing university research with the broader community.

It's about you, not us.

As an aside, this approach also feeds into our renewed Bachelor of Business degree.

Why is this background important? Two reasons. First, because our rebranding, our sensitivity to the small businesses that are the engine room of the Western Sydney economy, the revised Business degree, are innovations across Doblin's characterisation. We practice what we preach. Secondly these changes demonstrate our desire to turn the University outward to its communities. We want to see our research make a difference across the spectrum of businesses and across society.

But now I want to turn my attention to money. This was the first question I asked before giving you the background to our approach: Who pays for the idea and how much?

How much money do Australian universities make out of their patents?

First, let's establish a baseline: in 2005, Australian universities were granted 186 patents and plant breeder's rights. In 2013, they received 671. The number of patents peaked in 2010 at 762.

There was a significant jump from 2007. It is likely that the pending, ultimately abandoned, Research Quality Framework—a way of measuring the research output of Australian universities superseded by the Excellence in Research Australia program—was the prompt. The RQF may have used the number of patents issued by Australian universities as a proxy for their impact. Universities may have been incentivised to create patent offices—often called 'innovation' offices—as a way to increase patents and improve their metrics.

Let's look at the income. Again, 2007 was an odd year: 171 million dollars in gross commercial income. Generally, the range has been between 50 and 70 million dollars. The Group of Eight universities receive most of this income.

Seem pretty lucrative? That income is returned from around a third of the licenses universities hold.

You might draw some conclusions from that.

You might say that universities are wasting public funding securing uncommercial patents – they probably are, in some cases. They may be securing uncommercial patents for a number of reasons: a poor understanding of the commercial potential of patentable research; a desire to show commercial activity on paper (end of year KPIs come to mind); or it could be simple inertia—'this is the way we have always done things'. 

One answer to the question 'Who pays for the idea and how much?' would be that the government and a select number of licensees pay.

But the broader answer is that we all pay. When universities silo their IP in the hope of illusory commercial returns, that research is lost to the economy. The knowledge we produce should be used to generate innovation by those with the skills to identify commercially-viable research or the skills to further develop the commercial potential of research.

Western Sydney University, through its Research, Engagement, Development and Innovation unit, is finding ways to change the one-way communication that has characterised university approaches to IP.

One way it is doing this is through Easy Access IP. Easy Access IP allows a business free licensed access to university research on the condition that the business:

  • demonstrate how they will create value for society and the economy
  • acknowledge the licensing institution as the originator of the intellectual property
  • report annually on the progress on the development of the Easy Access IP
  • agree that if the IP is not exploited within three years, the licence will be revoked
  • agree that there will be no limitations on the licensees use of the IP for the university's own research.

The aim of Easy Access IP is to make it easier and cheaper for businesses to work with universities. With Easy Access IP, the business involved receives the commercial benefit of developing the university's IP; the university gets to see its work make an impact. Where there isn't a clear and immediate commercial return on research, Easy Access IP 'de-risks' a business's investment and initiates a partnership with the University.

While Easy Access IP isn't the only way Western Sydney University licenses its IP to business, it does typify the approach we are taking:

  • less emphasis on upfront license fees
  • 'clear air' to develop the technology
  • flexible profit-sharing arrangements
  • long-term development partnerships.

We haven't always taken this approach.

Ten years ago, the University licensed an organic pesticide to a small firm. The pesticide had, did have, clear commercial potential. But the firm couldn't take it forward, and the University insisted on the payment of license fees according to the contract it had negotiated. There was a loss of faith on both sides: for the University, in the firm's ability to deliver on their commitments; for the firm, in the University's ability to be flexible in the face of commercial reality.

Now, the University has renegotiated with the firm involved on more reasonable terms, giving them space to develop the product and bring it to market before seeking a return.

The University is now more likely to enter a profit-sharing arrangement than an up-front license fee—again, de-risking early phase investment in IP. Recently, the University has signed a deal along these lines with an Adelaide-based accelerator, Innovyz. Should the licensed IP show a profit, the University will receive 2.5% of the net.

Another way in which the University is building partnerships is by investing the returns from IP in people, not profit. The University recently concluded a deal with Waterfall, an established medtech company. Waterfall will partner with the University to commercialise some of the research emerging from the University's MARCS Institute for Brain, Behaviour and Development. One exciting medtech device they are working on is VitalCore: a wearable device that simultaneously measures cardiac and respiratory function. Waterfall has agreed to fund PhD students through their agreement with the University, and will invest significantly in the capacity of Western Sydney University researchers to further develop the technology.

It's important to point out that these commercial relationships filter throughout the system, benefitting multiple partners. Waterfall will prototype and manufacture at least some of its medtech devices through Adelaide-based manufacturers who formerly supplied the car industry. The University's approach to IP is, in a small way, helping to transition a legacy industry into advanced manufacturing.

If the University had remained in the old habits of protecting its IP rather than seeking to share it and build productive partnerships, this wouldn't have happened.

And that is the one thought I want to leave you with today: we spend an enormous amount of money on research. Much of it is not exploited to its full potential.

This can change with the right approach and the right partnerships.

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