Where’s the funding for Basic Research?
June 9th, 2010
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?
Who do you compete with, really?
April 1st, 2010
Two reports on innovation and competitiveness were released by the European Commission in recent weeks. These two reports come on the heels of the 2009 Global Competitive Index (GCI) being released last fall. They provide a fascinating look at the changing dynamics of our global economy as well as the impacts of our lingering economic crisis.
Why is this important? Just look at some of the recent shifts in the GCI Index as a result of the recent economic downturn. The U.S., which has historically held the #1 position, slipped to 2nd place allowing Switzerland to take 1st place. Singapore jumped from 5th place to 3rd place. Japan moved up from #9 to #8 in 2009 while Denmark dropped from 3rd to 5th place. Are these the countries you think of when conducting your competitive analysis?
Expanding your analysis of potential competitors creates advantages for you in a couple of ways. According to the EIS report, firms that are more innovative are less likely to cut back on innovation expenditures. The report found companies that maintained their innovation strategies and spending, including the use of open innovation and user innovation, were more resilient to economic downturns. Shifts in rankings as reported by the EIS suggest that other countries are being far more effective in remaining innovative and potentially producing a competitive threat to your business.
One of the most interesting findings in the 2009 EIS report is the causality between internationalization and innovation. “The extent to which a country’s businesses, institutions and industries are linked with resources and capabilities located outside the country is likely to positively impact the innovation performance of that country. Conversely, innovation intensive firms and countries are more likely to be able to compete successfully in international locations.” Movement across borders of capital, employees and students are key drivers to a company’s success. It’s not enough for your company to monitor competitive threats in other countries; it’s critical to be in the right countries to leverage your innovation efforts.
The U.S., despite falling to 2nd place this past year behind Switzerland, has a long standing tradition of highly efficient markets, sophisticated business culture and an impressive capacity for technological innovation supported by high levels of collaboration with research universities. Yet these very factors that drive US productivity and competitiveness are the areas where other countries are making impressive gains.
The EU27 outpace the US in all areas except those related to R&D expenditures and patents. While the US leads in 11 of the 19 indicators measured, the rate of growth is slowing (1.63%) while the EU27 is growing (3.17%). Similarly, compared to Japan, the EU27 have shown greater improvements in education, research and other collaborations and exports while Japan improved its lead in R&D expenditures and PCT patents.
The BRIC countries have been lumped together for some years, however the disparities reported in the EIS study suggest a new grouping will emerge. China is surging ahead with high tech exports, while Russia has fallen behind. Russia’s key strength is its higher education but it has not been effective in converting that to innovation growth. China surprisingly is outpacing the EU27 with their improvements in patents, trademarks and knowledge intensive services.
These findings are a not so gentle reminder that we must look past our borders when evaluating the competition but also when searching for partners and R&D opportunities. Depending on your business – manufacturing based or services based – you will find different countries offer different strengths as competitive threats or prospective resources.
Vision & Execution specializes in taking a global perspective to developing strategic growth plans for your business. If you’re struggling with how to ramp your growth internationally, contact us for a 60 minute complimentary review of your current strategy.
Is Product Management a Core Competency for Every Company?
January 11th, 2010
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.
- 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.
The rise in user communities and social media has enabled many companies to outsource piece parts of the NPD process.
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.
The Russians are coming…
December 11th, 2009
Actually they’ve been coming for the past 5 years to Silicon Valley Open Doors – an investor conference sponsored by AmBAR for Russian and Russian-American entrepreneurs. This is my fourth year attending and I’ve found it insightful in terms of the dynamics of innovation and migration of innovation centers. An interesting example was a company that presented in 2006 which designed a product for India, manufactured it in China and came to Silicon Valley for funding – the company was based in Israel.
This year has been notable in terms of the sophistication of the investor presentations and also in the complexity of the offerings. It’s not just twenty-somethings with a Web 2.0 application they coded in their dorm room. There’s more gray hair, more serial entrepreneurs and not so many hockey stick revenue projections.
What’s interesting this year is the migration of financing. A US-based company that started to flounder after receiving its Series A funding went to Russia for its next round of funding. It received funding from Troika Dialog (Russia) and DoCoMo (Japan). It was then able to close a sizable Series B round from Morgenthaler Ventures.
In addition to learning about entrepreneurial activity in former Soviet Union states, there are always nuggets to be gleaned from the high quality VC speakers they secure. A few highlights from my perspective are noted below:
The second day included a one hour Q&A session with Vinod Khosla of Khosla Ventures who offered his point of view across a wide area of topics but some particularly interesting ones on CleanTech:
And after 18 presentations culled from 80 submissions ….The winner is….PTP Group Americas.
Looking forward to SVOD 2010.
Vision & Execution celebrates its 10th Anniversary…
October 20th, 2009
…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.
Recession-Proof Your Business
December 2nd, 2008
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
Not Invented Here (NIH) is a Good Thing!
August 23rd, 2008
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