Hope is not a strategy

“Our strategy is to plant as many seeds as possible, we don’t always know which technologies will bear fruit in the marketplace…” — Katharine Ku

At face value, this statement by the head of Stanford’s Office of Technology Licensing, made in an interview for HEFCE during her recent UK visit, appears reasonable enough. If you are uncertain about what will succeed, you should plant as many seeds as possible.

Stanford indeed plants a lot of seeds. According to its annual report, in 2015 OTL evaluated 483 new invention disclosures, and maintained a portfolio of 695 technologies. It also entered into 112 new license agreements. That is good, even for an organization with at least 36 employees engaged in licensing activities — the sales process for such early-stage technologies is long and fraught with difficulty, even in organizations with adequate support.

However, seed planting isn’t really a strategy.

For instance, such strategists as Henry Mintzberg (2005) and John Roberts (2004) have argued that a strategy contains a multitude of elements. According to Roberts, in formulating a strategy, a firm requires:

1. A goal against which it can measure itself and judge success;
2. A statement of scope;
3. A specification of the nature of its competitive advantage, that is, how the firm will realize its goals; and
4. Explication of why the competitive advantage will be realized.

The statement of scope is further broken down into:

1. A specification of what business the firm is in;
2. What products and services it offers;
3. What customers and markets it serves;
4. What activities it undertakes;
5. Where it will do these activities; and
6. What technologies it will use.

Against these criteria, seed planting seems distinctly nonstrategic. If anything, it is an element of a strategy, but not a strategy in itself. Let’s look briefly at the seed planting “strategy.”

Crudely speaking, seed planting involves research being conducted in university labs; the generation of a set of outputs, to be published as conference papers or in academic journals; the filing of a patent following a period of evaluation; the licensing of the patent to an existing firm or a newly formed spinout; and collection of royalty if/when the licensee or spinout generates revenue.

There are a good number of issues here to discuss, but I’ll only focus on three in particular. In this article I’ll also ignore issues relating to research outputs.

The first problem relates to the evaluation and decision to file a patent. Even if you file numerous patents, you never really know which, if any, will bear fruit. We cannot predict the future and, in this era, markets and technology can change with extreme speed. A patent filed today may be completely irrelevant several years from now, before a product has even reached the market. In other words, an evaluation will often be out of date before any revenue is generated.

Indeed, even at Stanford in FY 2015, only 39 out of 695 inventions generated $100,000 or more in royalties, including one that generated $65 million (68% of OTL’s income). The vast majority of inventions in their portfolio generated nothing, and never will.

The second problem is, seed planting only really works if you have a good supply of cash to spend on patents. Planting so many seeds is an expensive business. Stanford, for instance, in FY 2015 spent $9.6 million on patenting. This is a sizable figure, and few universities can afford such a budget.

However, stretching the metaphor a little further, seeds need a great deal of care to achieve optimal growth. They need reasonably good soil, warmth, and moisture. Too little care will prevent the seed from growing, but the right amount of care, in even the most arid of environments, can prove extremely fruitful.

But, if you’re spending a huge amount of cash on a multitude of patents, you are limiting your ability to nurture seeds and to ensure that some do grow and remain relevant in the future. In other words, by investing in only their most promising seeds, universities could shape for themselves a future, ensure the ongoing relevance of at least some of their seeds, and ensure ongoing royalty generation.

The last problem we’ll discuss here relates to the generation of royalty itself. Tech transfer offices aren’t masters of their own fate. They rely on third parties to achieve their revenue goals, and actually do very little to encourage the third party beyond waving the license agreement in the air once or twice a year. By nurturing the most promising seeds, and providing licensees and investors a more mature offering, TTOs can seize control of their own fate and contribute to their success.

To mix a metaphor, employing a scattergun approach and hoping that some of your seeds bear fruit is not a strategy. However, actively identifying and nurturing the most promising seeds is a strategy. This is the primary objective of NPTT.

References

Henry Mintzberg (2005) ‘Five Ps for strategy’ in Mintzberg, H., Ahlstrand, B., Lampel, J. (eds.) Strategy Bites Back, Harlow: FT Prentice Hall.

John Roberts (2004) The Modern Firm: Organizational Design for Performance and Growth, Oxford: Oxford University Press.

Like this:

Like Loading…