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.

When asked to define Cleantech I usually count off using my fingers to make sure I’ve listed the myriad of industries captured under this umbrella term. Each industry is redefining business as usual to reduce its impact to the environment. Despite sharing a common moniker these industries mostly work in isolation from each other – much to our disadvantage. At Nordic Green II there was broad representation from each of cleantech’s subcategories as companies, commissions and experts updated us on the progress being made by Scandinavian countries. The need for synergy among these industries was identified and well illustrated by Sweden’s Energy Agency in a fun simulation game called SymBioCity. As a mayor for the day you gain an appreciation of how challenging it can be to integrate these industries, and what trade-offs you need to make to increase energy efficiency and optimize utilization of other natural resources all while reducing the carbon footprint of this make-believe city.

While the event kicked off with this holistic view, the numerous presenters seemed to be developing very exciting cleantech innovations in isolation from broader resource or climate affecting issues. Unfortunately I cannot point to any good examples of synergies among cleantech industries outside of Sweden. Can you?

The nearly 40 year lead that the Nordic countries have on the US in clean technology is a direct outcome of a socially responsible decision by national governments which drove investment in basic research. At Nordic Green II, it was striking how advanced the Nordic countries are when it comes to clean technology innovation. The results are compelling. While the US is hard at work to make up the difference, and we bring many resources to bear on the issues at hand, it will be a costly exercise to match the Nordic success.

What is the cost of playing catch up?
• Korea: “Green New Deal” ‐ $46 billion over 5 years
• Japan: invests $63 billion over 5 years
• US: plans to invest $172 billion over 5 years
• China: invests $440 billion over 10 years

Fortunately for the US, industry is playing a critical role in funding cleantech ventures: the US represented 21% of 2009 VC investments as compared to China at 14% and India at 6%.

What are other risks we should be taking now? In cleantech? In healthcare? Or In education? Where are the next disruptive ideas for socially responsible innovations?

That’s an interesting question in a Web 2.0 world, and it was recently posted as an inquiry on LinkedIn. The question becomes should your core competency be innovation, commercialization of innovation, or both?

Historically innovation has been presumed to be a core competency while commercialization has been much easier to outsource. When you think about the most successful companies, were they successful because they invented a novel solution or because they executed well on an idea whose time had come, or both? The challenge is having the vision and market savvy to identify the idea whose time has come ahead of the curve but not ahead of customer readiness to adopt.

Some large and notable companies are slashing their R&D budgets in favor of Open Innovation platforms such as those below sourcing “big” ideas from outside of the company.

• NineSigma
  leverages a singularly focused approach of posting well-defined tech briefs (needs) to it global network of solvers.
• Yet2 is a global marketplace that lists both “technology needs” and “technologies available”. Yet2′s software engine drives many of the corporate open innovation marketplaces (DuPont, P&G, etc.).
• TekScout
  connects companies (TekScouts) and scientists (TekExperts). The company cites its relationships with over 2000 academic institutions around the world in addition to the TekExperts who join the site directly.
• Innocentive offers a rewards-based approach to open innovation. Problem solvers post technical challenges to network of 140,000 technical solvers. Winning solutions are rewarded via cash awards. Although usually small, the potential reward is up to $1,000,000.

The rise in user communities and social media has enabled many companies to outsource piece parts of the NPD process.

• You can test theories about what will become a trend or track others’ trend projections with edopter.
• Monitor Google Trends and Google Insight for Search for search queries that suggest trends.
• Trendspotting service Trendwatching.com tracks consumer trends.
• SpringWise.com’s network of spotters scan the globe for new business ideas that you can mine.
• Fellowforce’s WebForce 2.1 provides an online suggestion box and customer challenge platform to facilitate co-creation with customers.
• Kluster facilitates internal brainstorming with its group decision making platform. Kluster has an interesting approach to prioritizing ideas as part of its solution.
• redesignme lets customers redesign the look and feel of your products — part customer QA and part customer co-creation.

See Not Invented Here is a Good Thing for more ideas.

While there are many good tools and resources that allow many parts or phases of the product development process to be outsourced, at the end of the day someone needs to translate the input into new business opportunities. It is an art as well as science to discern what new ideas are big marketable ideas. Hopefully you’ll be leveraging these tools soon to advance your business priorities.

…rather quietly.  It’s hard to believe that 10 years have gone by.  It’s the longest job I’ve had and most of the time the best boss I’ve had.  We’ve ridden the dot com boom and bust, the rolling waves of recessions adjusting our services to meet client needs along the way.  Our tag line evolved from Marketing Strategies that Deliver Results to Creating Value Across the Product Lifecycle to our latest incarnation of Turning Innovative Ideas into Global Success.

We’ve watched the epicenter of innovation — Silicon Valley — lose a bit of luster as emerging markets developed their own innovation centers.  We’re enjoying riding that wave with relationships to organizations like FinPro, AmBAR, Innovation Center Denmark with the goal of having similar relationships to Chinese and Indian trade organizations.

When we started, cleantech had been languishing for roughly 20 years…it was not the hot technology sector it is today targeted to lead the US into financial recovery.  Now it’s a significant part of our business and we’ve done our pro bono part mentoring entrepreneurs competing in the California Cleantech Open.

What has been constant over the 10 years is our passion for helping entrepreneurs and companies find the best way to bring the best products to market for the benefit of customers and now more than ever, the planet.  We look forward to continuing that commitment here in Silicon Valley and the many new innovation centers around the globe.

There has been talk of being in a recession most of 2008. With the credit crises and stock market swan dive, the debate should have been over. Yesterday’s news made it official – two quarters in a row of declining growth.

Earlier this year, Business Week published an article on the 10 Worst Innovation Mistakes In A Recession. #4 was to stop New Product Development under the assumption that it would save money. In fact, it doesn’t save money, it simply reduces the chances for new revenue streams downstream.

Research conducted by Robert Cooper, President of the Product Development Institute, in 2004 found that new product sales fell from 32.6 percent of total company sales in the mid-1990s to 28 percent. More importantly, the same study showed that profits derived from new products were down from 33.2 percent of business profits to 28.3 percent over the same period. Why? What did companies do differently? Quite simply, companies stopped taking risks — new to world product innovations fell nearly 50% during that same time period accounting for the drop in revenues and profits.

What lessons can you learn from these past mistakes? I hope you will decide that now is not the time to slow down innovation. Your approach to innovation needs to become more productive and efficient. It’s not simply about being more creative but about being brilliant in your execution. How do you mobilize people and keep them focused? How do you explore technical feasibility? How do you identify what will drive adoption? How do you determine who best to partner or align yourself with to realize your vision? And most of all, how do you manage risk?

I wish you great success in these interesting times for new opportunities.

Regards,
Patrina