Presentation on theme: "International Islamic University Malaysia September 9 & 10, 2003"— Presentation transcript:
1 International Islamic University Malaysia September 9 & 10, 2003 The Impact & Commercialization of Research By Mohd. Azwar Mahmud, CEO, MALAYSIA VENTURE CAPITAL MANAGEMENT BHDInternational Islamic University MalaysiaSeptember 9 & 10, 2003
2 A G E N D A Key Concept, Relationship and Relevance Benchmarking Indigenous Research:Commercialization: VC’s PerspectiveConclusions
4 Research Creative work undertaken on a systematic basis TaxonomyResearchCreative workundertaken on a systematic basisto increase the stock of knowledgeto use this stock of new found knowledgefor the betterment of man and societySource: Frascati Manual, 2002, OECDDefinition from the Organization for Economic Co-operation & Development [OECD] vide Frascati Manual [1994, p.29]
5 Creativity – accidental, art, diff to plan & predict We discover what before existed, though to us unknown. (discovery)We invent what did not before exist. (invention)Operationalising discovery & invention to practical use (technology)Now that we got some laughs,I want to put forward two notions: one straightforward and one radical.
6 Commercialization- process InnovationEvolutionizing technology to create competitive advantageCommercialization- processTaking innovation to market profitablyTechnopreneurEnterprising soul that make innovation & commercialization possibleNow that we got some laughs,I want to put forward two notions: one straightforward and one radical.
7 Relevance - Creativity, Innovation & Commercialization Resources for Competitive AdvantageKey engine for perpetual “regeneration & reinvention” of the US economy into the most dynamic & competitive globallyNotes for use in next slideAgainst this backdrop how does one quantitatively discern the revenue generated from IP-related endeavor?In this instance, we will use the U.S. copyright industry as our reference-point – given that U.S. copyright-based companies continue to be on the leading edge of the world’s high technology, entertainment, and publishing industries;Meanwhile attempts will be made to determine the value of IP-related endeavor, both from a macro [the national level] and micro perspective – with the latter, on the basis of a case study;Similarly, efforts will be made to ascertain the sources and global value of IP-related endeavor from the piracy of U.S. copyrighted materials;
9 5232 R&D projects implemented during 6 MP and 7 MP revealed 14% (732) of these are“potential candidates” for commercializationwhile 5.1% (267) was commercialized.Source: MOSTE
10 Examples of Local Research Success InventionAbstractPutra J-58: The Grain Maize Hybrid Variety Putra J-58 is the first grain maize hybrid variety ever developed and released in Malaysia for use as animal feed.White spot syndrome (WSS) Detection Kit for shrimp A rapid test kit, produced at UPM, is sold in many countries affected by the disease. This novel single tube method is the first in the world and is patent pending.Strength Measuring Device for Hard Soil, Weak Rock and Concrete Measures the indirect tensile strength of weak rock, hard soil and concrete. It is protected by a patent and won the Bronze Medal for International Invention, Invention, Industrial Design and Technology Exhibition (I.Tex’99).UPM’s PCR technique is 100-fold more sensitive, simple to perform; more samples can tested, and takes less than 10 hours compared with previous methods.Diagnostic Kit for Newcastle Disease Virus Source: UPM
11 Venture Capital backed Companies Spinning out of Local Research CompanyProductCommercialization of electroplating technology by UTM (Backed by MTDC)Malaysian Bio-Diagnostic Research Sdn Bhd (MBDR)Commercialization of rapid diagnostic detection for typhoid fever from USM School of Medical Sciences. (Backed by MTDC)Malaysian Vaccine and Pharmaceuticals Sdn Bhd (MVP)Commercialization of Aujeszky’s Disease Killed Vaccines formulated by Veterinary Research Institute (VRI) (Backed by MTDC).Malaysian Agri-HiTech Sdn Bhd (MAH)Commercialization of Arbuscular mycorrhiza fungi to strengthen tree roots and provide defense against pathogen. The invention originated from UPM’s laboratory. (Backed by MTDC)Malaysian Electroplating Technology Sdn BhdSource: MTDC
12 Venture Capital backed Companies Spinning out of Local Research CompanyProductPhytes Biotek Sdn BhdCommercialization of a standardized extract of Tongkat Ali from UM & FRIM. (Backed by MAVCAP)Nusuara Technologies Sdn BhdThe technology for speech recognition and natural language originated from Hong Kong University of Science and Technology. Intellectual property lies within the company. (Backed by MAVCAP).Commercialization of aromatherapy using locally extracted essential oil. (Backed by MAVCAP)Fito Elegance Sdn BhdSource: MAVCAP
14 Low Rates of Commercialization: Root Causes Funding mechanism not conducive to commercializationResearchers are not commercially aware of the potential of their research findingsImpending lack of effective Research Management Practices in universities and PRIsManpower issues constraint ease of translating research results into commercial outputsResearch focus is largely publications-oriented with little applications-oriented researchSource: MOSTE
15 Low Rates of Commercialization: Root Causes Lack of clear incentives and rewards to stimulate commercializationPaucity of networking mechanism linking key parties to commercialize research findingsPockets of excellence exist in the Innovation Infrastructure, but overall, it suffers from systemic weaknessShortage of diffusion mechanisms to accelerate adoption of technologies across different sectorsPre-technical feasibility studies on marketable outputs or tangible benefits are seldom conducted by researcher, since it is not an institutional requirementSource: MOSTE
16 Four main hypotheses affecting low rates of commercialization Manpower issuesIndustry linkageInnovation infrastructureDiffusion of Science and Technology knowledge
17 Manpower issues Lack of people with business building competence ; To attract world class talents to raise standards of research in the country;To attract and retain overseas Malaysian S&T personnel;Lack of S&T personnel with the required skills in the country. 64% respondents agreed agreed statement suggesting the Manpower issue is not just one of “capacity” but more so in term of “capability”World Bank report which ranked 128 developing countries based upontheir scientific proficiency, Malaysia was categorized as “ScientificallyLagging” (World Bank 2002). Malaysia generates less than 5 S&T articlesper 1 Billion GDP (MOSTE, 2002:84)
18 Innovation infrastructure Industry linkage“Marketing of my research findings to industry is not a requirement in my job”Facing difficulty in finding partners for research collaboration;Pro-sharing of information with industry.Innovation infrastructure91% respondents agreed that Malaysia requires a critical mass of research centers of excellence for various disciplinesMalaysia’s share of worldwide scientific publications stand at mere 0.01% (Indicators Report, MOSTE 1999)
19 Diffusion of S&T knowledge Do not know what technology transfer mechanisms are availableDo not have access to Technology Transfer organizationLack of good Technology Broker in the market
21 COMMERCIAL WORLD TECHNICAL WORLD BUSINESS CAPABILITIES Results RELATIONSHIPS BETWEEN CREATIVITY, TECHNOLOGICAL INNOVATION & COMMERCIALIZATIONCOMMERCIAL WORLDTECHNICAL WORLDTECHNO-PRENEURSHIP15 – 20 % of Commercial proceed to be ploughed back into R&DBUSINESS CAPABILITIESTECHNOLOGICAL INNOVATIONSINVENTIONS/DISCOVERIES/TECHNOLOGIESResultsActivitiesResearchActivitiesDevelop’ mActivitiesProduct/ProcessDevelop’mActivitiesMarketDevelop’mActivitiesTinkering/ExperimentingSource: Technology & Strategy: A General Management Perspective
22 Commercialization• Research universities are an “engine” for economic growth and a source of new knowledge• Fertile ground for new ideas• Educate workers comfortable with new technology• Focused on research involving revolutionary concepts• Funded with a mandate to benefit society• So if research universities are such a great engine, why isn’t our Corvette smoking down the track?• Engines must be properly designed and tuned• My car needs more than just an engine!The First APEC Incubation ForumAPEC
23 Corporate Spin-offs Versus University Start-Ups in the EU • Benefits of Corporate Spin-offsGreater business experienceBetter access to development capitalBetter access to marketsBetter job prospects for employees%%• Hurdles of University Start-upsGrow slowlyCommercialization hampered by bureaucracyLess entrepreneurial approachThe First APEC Incubation ForumAPECSource: EU Study, 2000
24 COMBINED PROBABILITY OF SUCCESS 17% Lesson # 1 - Chances of Success for a High-Tech Start-upOn average, good plans, people, and businesses succeed only one inten times.INDIVIDUAL EVENTPROBABILITYCompany has sufficient capital %Management is capable and focused %Product development goes as planned %Production and component sourcinggoes as planned %Competitors behave as expected %Customers want product %Pricing is forecast correctly %Patents are issued and are enforceable %Now that we got some laughs,I want to put forward two notions: one straightforward and one radical.COMBINED PROBABILITY OF SUCCESS 17%Source: Harvard Business Review
25 There are Lots of Players with Different Goals!! Business incubatorUniversityGovernmentProfitCornered MarketsPublicationReputationJobsDistributionCommercializationIdeasEducation of StudentsEconomic DevelopmentImprovement of LifeThe First APEC Incubation ForumAPEC
27 Rapidly Changing Global Scenario • Shortening life cycle of products and services: “if you understand the technology, it is obsolete”• Rapidly changing business environment: “it’s not the big that eats the small; it’s the fast that eats the slow”• Globalization of world economies, technologies and innovations• Shift of emphasis from a decaying industrial economy composed of large firms to a knowledge-based entrepreneurial economy driven by innovative technologyThe First APEC Incubation ForumAPECSource: 1000ventures.com
28 Gap Between Research & Commercial Application Target Resources Where They Have The Greatest Impact On New Business CreationExisting Research ResourcesExisting Commercialization ResourcesResources“Valley of Death”“Entrepreneurial Zone”“Gap Funding”Idea Patent Practice Product Commercial BusinessProduct Development TimelineSource: School of Venture, Hoseo University, Korea [itbi_kim]
29 Barriers to Commercialization Industry • Poor understanding of the nature of academe• Poor understanding of its financial imperatives• Funding for research• Funding for commercialization activities• Desire to overlook the importance of student education• View of university as a “vendor” not a “partner”•“Purchase” agreements for research• University seen as a source of “contract research”• Lack of “industrial” role in education• Difficulty in funding early, risky stages of the research/product processThe First APEC Incubation ForumAPEC
30 Barriers to Commercialization Universities • Poor understanding of the industrial environment• Lack of understanding of the need for speed• Unrealistic evaluation of the work of commercialization• Need to protect education and discovery missions• Susceptibility to litigation• Lack of revenue to offset liability• Deep pockets of endowments• Lack of flexibility in the system• Government regulations• Protection of multiple, independent participantsSo, on a macro basis, what’s the value scenario like?Stephen Siwek averred in his Paper, “Copyright Industries in the U.S. Economy – The 2002 Report – prepared for the International Intellectual Property Alliance [IIPA] – that:The First APEC Incubation ForumAPEC
31 Venture makes sense for very few companies MOST successful companies are NOT funded by ventureVenture Capital ONLY makes sense for very few companiesPre-Seed funding(cradle)- RM 50KSeed funding- up to RM 2 millionPost-Seed funding- up to RM 40 millionVenture capitalists are not risk-takers, they are risk managers
32 Source: Dresdner RCM Global Investors LLC, Ca HIGH REWARDA study, sponsored by the National Venture Capital Associationfound the following;Companies backed by venture capital generate 2X the sales,pay 3X the federal taxes;And invest far more heavily in research and development as their traditionally financed counterparts,VC backed companies generate $634 in sales for every $1,000 inassets, compared with traditional companies, $391 in sales.Venture-backed firms spend more money on R&D costs: $ 44 per$1,000 in assets compared with $15 for others.* Ciena Corp USA – IPO on NASDAQ reach valuation of USD 2.1 bilSource: Dresdner RCM Global Investors LLC, Ca
33 Lesson # 1 - Chances of Success for a High-Tech Start-up Idea to IPO6 in 1,000,000Plans to IPO6 in 1,000Funded to IPO1 in 10Now that we got some laughs,I want to put forward two notions: one straightforward and one radical.Source: Saratoga Venture Finance
34 Lesson # 2 - Scientist Versus Rainmaker (Who makes the better Entrepreneur?)Case 1: Biotech early stage in neutraceutical)- water soluble extraction technology- Strong technology and academic grounding- Commercialization fresh from the lab- Over-promise & underperformed- Difficulty adjusting to real-world practicesCase 2: MEMS company design fabrication & packaging of sensors- Veteran Engineers in semiconductors business- Have strong contact with the industry and understand the practicalities- Under-stated & Over performedCase 3: EAI Software- Freshie (bright young graduates)- Naïve, gun-ho, stubborn and idealistic- Over--promise & underperformedSo, on a macro basis, what’s the value scenario like?Stephen Siwek averred in his Paper, “Copyright Industries in the U.S. Economy – The 2002 Report – prepared for the International Intellectual Property Alliance [IIPA] – that:
35 Source: Dresdner RCM Global Investors LLC, Ca Some Common Mistakes Entrepreneurs make:-Mistakes #1: Hiring the Wrong Person to Fill a Key PositionMistakes #2: Thinking Small to Reduce RiskMistakes #3: Telling VCs What You Think They Want to HearMistakes #4: Believing Your Competition Is IncompetentMistakes #5: Focusing Solely on the MoneySource: Dresdner RCM Global Investors LLC, CaSource: Dresdner RCM Global Investors LLC
37 Commercialization is “risky” mainly because so few of the so-called entrepreneurs know what they are doing. They lack the methodology. The violate elementary and well-known rules.Now that we got some laughs,I want to put forward two notions: one straightforward and one radical.
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