entreSociety

Building an entrepreneurial society

Archive for the month “February, 2012”

Moving from the lab to the practical world

There is constant research going on in government, university and corporate labs but we are left wondering how much of it is actually commercialized.  By most estimates only a small proportion ever is.  Presumably the rest sits on the shelf in the hope or expectation that someone, someday will find a use for it.  Too often we expect that the breakthroughs discovered will be self evident and the market will come to them.  There is a way to try and improve on this record by going back to our jobs to be done analysis.

As we have discussed in a number of posts, a technology will be marketable if it helps someone do a job they are trying to do better than they could without it.  If there is a solution in a lab that will fit this purpose then it has an opportunity for commercial success.  When we find a job to be done that we believe can be done better we can look then to research breakthroughs to see if there is something we can utilize.   By framing the breakthrough in the jobs to be done analysis we start to bring it out of the lab into the practical world.  From there we can apply the business plan process to test it out in the market and, hopefully, scale up a business around it.

There is another trend happening that creates a variation on the jobs to be done analysis.  Organizations are performing meta analysis where they gather data from basic research that has been done and look for ways to put some breakthroughs together in a useful manner.  If this form of analysis shows some patterns with a potential market viability we can then look for jobs that would be effected and determine if they could benefit.  While we have gone about it in a reverse manner (i.e. starting with the technology) we still need to tie it to jobs to be done before we can assess the potential for market success.  A technology that does not provide a practical world solution will not be successfully commercialized.

I believe that the reason universities and some corporate research facilities fail to commercialize technology breakthroughs is their technology first mindset.  They assume that any breakthrough has value in and of itself.  They need to link these technologies to uses in the market which is something they have little experience in.  That is why corporations have to ensure there is a good communication flow between their business units and their research facilities.  There a further opportunity for corporations to make breakthroughs they can’t use available to other organizations who can capitalize.  This step would create additional value for the company doing the research turning their facilities into profit centres.  It also benefits society when value is created from something that would otherwise sit on a shelf shielded by patent protection.

Universities and government labs have to ensure they work with private enterprise or even other government departments to find market benefits.  The non-research government departments need to start becoming more market aware as well.  There is no reason why it should only be private enterprise commercializing technology.  Governments around the world are facing critical financial problems that need innovative solutions.  Maybe they should be looking in their own research labs.

There is a hesitation in sharing that results from parties wanting to monopolize the financial and publicity benefits of their discoveries.  However these benefits will not arise if there is no commercialization.  So universities, government labs and corporations need to work out reasonable profit sharing models or we will be here next year, and the years after that wondering why we can’t commercialize discoveries.  It all starts with the people making the discoveries working with the people looking for ways to improve on the jobs being done.

Putting productivity into perspective

I read yet another column in the Globe and Mail that states that productivity improvement is the key to the future.  This productivity improvement was also the key for lower wage earners and the sustainability of a middle class.  That may be true depending on where the productivity improvement comes from.  If there is an increase in productivity from existing companies it could result in an increase in revenue and profits from sales to new customers.  It could also result in no new revenue and increased profits from reducing the need for people.  The former could help or sustain the middle class and low income earner while the latter will further erode them.

If we get productivity improvements from new companies that hire people then that is definitely a potential lifeline for middle and low income earners.  But first we have to start these new companies.  In that regard new enterprise creation is by far more important than productivity improvements.

The benefit that new enterprises have over existing ones is the absence of legacy infrastructure and corporate culture.  There is an opportunity to build in cost structures that enable them to compete on a global basis.  They can utilize technology and business model innovation with specific cost structure targets in mind based on the need to compete.  But there is also a need to have products or services that the world wants.

We need to lever Canada’s natural advantages and one of them is natural resources.  But we need to innovate around these to make more from value added production and the creation of new technologies and services.  There are other sectors besides resources where we can start to build enterprises around existing strengths and experiences.  This need was discussed in an earlier post.

The point I am making here is that a knee jerk comment that we need more productivity has no merit on its own.  But we do need to wake up and start looking for opportunities where we can build competitive new enterprises that have the appropriate cost structure built in.  That is the key to a sustainable future for Canada all of its people.

Where does Canada fit in a global economy?

As a country we have not been successful in building companies that have been successful in a global marketplace.  We have also been concerned about our inability to grow companies into strong mid or large market competitors.  There is a relationship between these two issues.  Canada is not a large market that is capabable of sustaining larger companies with a few execptions in protected industries.  We need to be able to build success in international markets if we are to create the kinds of companies that become long term success stories.

There is a constant complaint that there is not enough risk capital or follow on funding to build large companies in this country.  But I think we have this backward.  Capital follows opportunities and if we had the kinds of enterprises with growth potential then we would find the capital was there.  So we should start with the opportunity side of the equation.

If we try to mimic the Americans by competing in all market segments we will find ourselves spread too thin to match up to them.  We don’t have the population, management depth or financial resources to do this.  We have to look for areas where we have natural strengths and start focussing there. 

We have vast natural resources which is what has been sustaining a large part of our economy in recent years.  We have huge expanses of farmland and one of the worlds largest supply of fresh water that can make us a power in food production.  But despite these two obvious advantages we still fail to fully capitalize on them.  That brings me to the next step which is finding the right opportunities within these areas of strength that will have a global impact.    

We can sell raw materials such as oil and mineral or wheat to international companies that in turn process these into finished goods or we can find a way to do some of the processing ourselves.  If the world needs food and resources then they have to come to us.  All of the low cost labour in the world can’t make up for a shortage of water or arable land.  We will need to understand what products the world needs in these areas and start finding a way to produce the finished products ourselves using innovative techniques to keep our cost structure low.  This process will take some time to fully develop but we need to get started. 

We want to make sure we participate in technology innovation as well but here we also need to determine which technologies we have the best chance of success at.  We can try to compete against the world in digital media and computer technology and we will have some successes.  However, we may also find these markets much more competitive than ones where we have a natural advantage.  Competing in these markets is a numbers game.  The more participants we have the more successes we will have but the percentage will be small and it will be difficult for us to build sustained global market leaders.  There may be better ways to spend our money.

Turning again to food and natural resources there are many technology development opportunities.  With a capitve market sector we have a built in lab to test out and develop new technologies.  These technologies can be used by our producers to build competitive business models and to sell into international markets.  Right now we do not have strength in these markets and it will take time to build them.  But done with focus, we should be able to build some world leaders more cost effectively than competing in other areas of technology.

We can expand our advantages further by looking at agriculture not just as food production but as a health and nutrition market.  This expanded perspective will enable us to develop broader knowledge around health and nutrition that we can use to build stronger competitors in our own country but also to inform and consult to global food and health product producers.  We can do the same by looking beyond oil and gas to energy and environmental management.  We can use this wider scope to become world leaders in alternative energy and environmental technology.  We should also be able to provide expertise to other countries in natural resource management in mining and oil and gas.

If we could teach our telecom companies and banks how to compete globally, without the market protections they have enjoyed at home, we might be able to offer additional services to the world.  They will need to grow autonomous units that have low cost models before this opportunity becomes available but they have the resources to launch these ventures. 

Building strong global leaders in key markets will also build strong domestic companies especially in services.  We will need professional and financial services to support the companies with Canadian head offices.  Other support sectors in retail, hospitality, entertainment education and healthcare will thrive with a strong base of global competitors.  Without the ability to compete globally we will be just providers of natural resources and we will see our support economy continually hollowed out.

We obviously can’t solve all of the challenges preventing Canada from competing globally in one post.  There are other factors we will cover in future posts such as the need for private companies and owners that want to grow businesses and not just flip them at the first opportunity.  But the point I wanted to make here is that we need to work with the natural advantages we have in this country that will become increasingly larger in the future.  We have to focus and start now to build on them.  We have to push aside the notion that innovation only means IT and social media or that anything to do with natural resources or agriculture is old school.  We also have to avoid thinking we have to be smaller version of the US.  The same way we can lead the world when we focus on certain sports in the Olympics where we have an advantage we can do in business.   

 

 

     

What to do for the next ten to twenty years

Increasingly we are reading and hearing about major structural changes that are taking place in the global economy.  These changes are apparent in the weakness in Western economies while developing economies are still growing.  The seemingly permanent nature of some unemployment in the developed countries as manufacturing has moved offshore.  Some previously safe activities in accounting, medicine and engineering are also being moved to lower cost countries.  But what is most interesting is that these developing countries are starting to build their own businesses and institutions and will not rely on worked handed out by Western businesses.  The other comment that goes along with this discussion is that the transition will play out over the next ten to twenty years.

When a timeline like ten to twenty years is thrown at us we tend not to react with any sense of urgency.  In fact, we probably ignore the issue and carry on business as usual.  Maybe we believe someone else will take care of the problem or that we can suddenly just jump back into the game once the event takes place.  But this line of thinking is dangerous in the circumstances we now face for several reasons.

Firstly, the old way we have enjoyed for fifty or so years is not coming back.  It is not a case of just holding on for 10 or 20 years, get rid of our debt problem, tax some rich people and everything will be back to the way it was.  Setting aside the fact that 10 or 20 years of that would not be pleasant, it is not going to happen that way.  Too much has changed already and the changes will continue.

The impact of developing countries building self sufficient economies and pushing to create prosperity will evolve over this period of time and will not just suddenly appear.  We need to start evolving our way of doing business to mesh with these changes because future competitors, suppliers and markets will come from some of these countries.  They will also greatly impact the cost structure of business with the ability to complete at much lower prices than we currently can.

The modern world populations are aging while the developing world still has a large workforce of younger people.  We had been relying on immigration from some of these countries to maintain our workforce.  However, they will find increasing opportunities in their own countries and be less interested in ours.  We need to ensure we keep our innovative edge and we need to make sure we utilize the experience of all of our people.  Younger generations of tech saavy people combined with the business knowledge and experience of older generations is a combination the developing world doesn’t have.  We need to figure out how to mobilize that strength.

We have legacy infrastructures, institutions and attitudes to overcome.  The developing world has none of this and can build them from the ground up.  Many are currently held back a little by incompetent and corrupt governments and laws but will overcome these at some point.  We have to evolve our institutions and businesses to enable entrepreneurs and society to keep pace with developing societies.

When a business is faced with challenges from newcomers they have the choice of innovating their own new products and business models or eventually going out of business.  The successful ones will create internal startups that are looking for the new products that come online as the old ones retire.  They strive to make their own products obsolete before someone else does.  We need to do the same with our entire economies.  We need a strong entrepreneurial base that will mirror the approaches of the developing economies.  These new businesses will create new infrastructure, have lower cost bases, look at the world as the market and be ready to compete head on with these new economies.

As these entrepreneurs build these new business models and products they will help to define the kinds of laws, government, infrastructure and financial system needed.  We have to stop trying to bring the world back to the way things were because that is no longer an option.  We have to stop propping up obsolete industries and look for ways to evolve them or to create new ones.  We need everyone to think about how they will be effected and what they can do to contribute; you can’t be assured someone else will take care of it.  We need to start now not in ten to twenty years.

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