Vision & Execution’s Weblog

After attending Nordic Green II and Building Innovation Bridges between US and Europe, I became curious about just how much the US spends on basic research and where does it go. Turns out our government publishes this data and it’s really quite interesting.

From the National Science Board’s 2010 Digest on Key Science and Engineering Indicators, I found the following fascinating facts:

Basic vs. Applied Research Funding Sources

In the US, unlike most other countries, industry is responsible for the bulk of R&D investment and has been since 1980. In 2008, 67% of the estimated total was sponsored by industry followed by 26% from the federal government and the remaining 7% from educational institutions and other non-profits. The majority of the industry funds (78%) are for applied research and development while basic research gets 60% of its funding from the federal government.

Volume vs. Intensity vs. Velocity

Globally, the US in sheer dollar value, spends the most on R&D estimated at $398 billion in 2008. The rapidly growing R&D expenditures of the Asia-8 economies (China, India, Japan, Malaysia, Singapore, South Korea, Taiwan, and Thailand) surpassed those of the EU-27 in 2003.


When it comes to R&D intensity – how much of a country’s economic activity (gross domestic product) it reinvests – Asia takes the lead. The Asia-8 have increased their intensity with South Korea committing 3.5% of its GDP followed closely by Japan at 3.4% of its GDP. Both the EU-27 and the US have remained steady and well below the 3% mark.

The Asia -8 economies growth rates for R&D often exceeded 10% and in China’s case, 20%, annually over the period 1996–2007. Comparable R&D growth rates for the United States and the EU-27 averaged single digits — 5%–6%. Surprisingly, only 5% of China’s R&D is in Basic Research

Why is this significant?

As noted in the Proceedings of the Sino-US Forum on Basic Science for the Next Fifteen Years, numerous economic studies have indicated that up to 50 percent of economic growth can be attributed to research and development (R&D), with basic research as the driving force. These analyses also indicate that the social rate of return on investments in basic research is twice the private rate of return, suggesting that government is more likely to invest in basic research than private industry, and also that government investments leverage substantial research investments from other sources, primarily industry. Basic research is also essential in teaching new generations of scientists and engineers about the detailed assumptions and processes of science, no matter what their ultimate career choices turn out to be. In particular, individuals who have received basic research experience at the PhD level constitute a key resource for translating scientific results into economic growth.

It’s interesting to note that Obama’s 2011 budget plans for a 3.5% decrease in applied research funds while it increases basic research by 4.1%…assuming the budget gets passed. The total amount has remained relatively stable despite multiple administrations, with the exception of the 2009 blip for the American Recovery and Reinvestment Act. This is not the way the US will remain competitive in the global economy.

In Silicon Valley we have a plethora of international trade organizations ensconced to help facilitate business among US companies and investors with foreign companies wishing to enter the US market. I’ve noted that the longer the trade organization has a had presence in Silicon Valley the greater success they’ve had in transferring knowledge back to the home country for the benefit of their local entrepreneurs. Yet, no one has been able to replicate the success of Silicon Valley and the relative ease with which successful new companies are created in the US. There are many cultural reasons why Silicon Valley exists and remains the largest entrepreneurial ecosystem in the world. Risk-taking is a major factor…the US is more tolerant of failure than most other countries and more importantly there is significantly more upside to taking risks through better exit opportunities in the US. But what are the advantages for US companies to go outside their home country? What can these trade organizations offer to US entrepreneurs that can facilitate knowledge transfer…teaching entrepreneurialism to the home country while transferring technology knowledge to the US companies? Many of these countries function as venture capitalists but are they proactively drawing the best US entrepreneurs to partner with local companies or research institutes to fund rapid commercialization of new technologies? How do we facilitate two way traffic to enrich entrepreneurs in every country? And if they were to succeed how long would Silicon Valley sustain its competitive advantage?

Patrina Mack, Managing Partner, Vision & Execution

Web-enabled Open Innovation or “NPD 2.0” is changing all phases of product development with numerous solutions to tackle different aspects of the product development lifecycle.

No longer is the acronym “NIH” a derogatory remark associated with externally developed projects. The collaborative web has enabled unprecedented levels of interaction with customers and outside experts. Companies from Procter & Gamble to Legos to Dell Computers to GlaxoSmithKline are opening up their new product development process to enable co-creation with customers, open innovation with experts, and utilize marketplaces to reach talent on an as needed basis.

To learn more about NPD 2.0, attend the 32nd International PDMA Conference in Orlando, FL from September 15th to the 17th. The conference covers all aspects of new product development and innovation, and the insights the experts will share at my panel on NPD 2.0 will be just a part of the value you and your organization will get from attending. To get an early bird discount, register before August 22nd, and use my Speaker Code SR08IC for an additional 20% off discount.

Consider how you can apply NPD 2.0 to take your business to the next level: the following list shows just some of the new Web 2.0 applications that are out there to help you increase your company’s effectiveness at innovation.

Phase 0 – Vision

Check edopter to test your theories about what will become a trend or to track others’ trend projections. Or, test your ideas at IdeaBlob and possibly win funding. The August winner was an organic snacks vending machine for schools. You can let your customers redesign your products at redesignme which is part customer QA and part customer co-creation.

Phase 1 – Define

WebForce 2.1 from Fellowforce provides an online suggestion box and customer challenge platform to facilitate co-creation with customers. Salesforce.com’s Idea Platform is a similar solution in use by Dell and Starbucks. You can help facilitate internal brainstorming with Kluster’s group decision making platform. Kluster has an interesting approach to prioritizing ideas as part of its solution.

Phase 2 – Develop

Now you can look outside your own R&D organization to tackle those thorny development issues stumping your team. One alternative to the cost and time associated with establishing a relationship with an outsourcing organization is to present your challenge to external developers. Sites such as Innocentive, TekScout, and IdeaCrossing provide access to registered and sometimes vetted problem solvers. There are also firms such as Shapeways where folks can present their 3D designs.

Phase 3 – Testing

The testing phase has historically been given too little attention and customers are often subjected to buggy, unstable solutions. uTest has assembled a community of software QA professionals and can assemble virtual teams to test your web-based software. For mobile applications a specialized testing solution, Mob4Hire, tests mobile applications globally.

Phase 4 – Launch

If you’re ready to bring your product to market and are still not sure what to call it, try NameThis to test your naming ideas for the winner. Or if you’re fresh out of creative ideas to develop your marketing materials, try outsourcing your projects to CrowdSpring where designers compete with ideas.

Phase 5 – Sustaining

With the advent of the citizen reporter how does any company track what is being said about their brand or product? Companies like Scout Labs enable real time tracking and engaging with customer posts as well as the ability to request real-time customer feedback.

Take advantage of the hot topics and innovative community at this year’s International PDMA Conference (conference.pdma.org). The details of my panel on NPD 2.0 are below. Register for an early bird discount before August 22nd and an additional 20% off speaker discount using my speaker code SR08IC.

Regards,
Patrina