How to Create Productive Partnerships With Universities
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How to Create Productive Partnerships With Universities SUMMER 2012 VOL.53 NO.4 REPRINT NUMBER 53417 Markus Perkmann and Ammon Salter “Working with external partners allows them to access different pools of knowledge and save r&D costs.” the pharmaceutical companies novartis, Glaxosmithkline, Merck and Pfizer have invested together in open science initia- tives even though they are otherwise fierce competitors. suMMer 2012 MIt sloan ManaGeMent reVIeW 79
In Partnerships
How to Create Productive Partnerships With Universities SUMMER 2012 VOL.53 NO.4 REPRINT NUMBER 53417 Markus Perkmann and Ammon Salter “Working with external partners allows them to access different pools of knowledge and save r&D costs.” the pharmaceutical companies novartis, Glaxosmithkline, Merck and Pfizer have invested together in open science initia- tives even though they are otherwise fierce competitors. suMMer 2012 MIt sloan ManaGeMent reVIeW 79
the pharmaceutical companies novartis, Glaxosmithkline, Merck and Pfizer have invested together in open science initia- tives even though they are otherwise fierce competitors. suMMer 2012 MIt sloan ManaGeMent reVIeW 79 “our research suggests that businesses can struc- ture their relationships with universities in ways that make them much more valuable.” short-term collaborations are useful, common and relatively easy to facilitate if they are targeted and aligned to universities’ and academics’ ways of working. However, they require creative structuring, as the clock speed of academic research and business practice can be wildly diver- gent. Conversely, many academics think long-term, and this can be an advantage for a business as it may overcome managers’ tendency to look to the next quarter. “going long” with academics in the search for new ideas can unlock a range of possibilities and even help to create a new innovation ecosystem that will sustain the business five or 10 years into the future. However, such long-term collaborations require more patient investment and managerial attention to the design and governance of the col- laboration or they can go easily awry. The second dimension is the degree of disclo- sure of the results of the partnership. openness facilitates rapid publishing, which constitutes the lifeblood of public science7 and has the advantage of reducing transaction costs related to intellectual property. For companies, however, protection fa- cilitates the commercialization of discoveries. if we combine these two dimensions, we can see four different collaboration modes: 1. The idea lab, where managers put aside their de- sire for secrecy and work with academics to create new options and contacts. 2. The grand challenge, where managers and aca- demics work together to create a new knowledge base that will be shared in the public domain. 3. The extended workbench, where managers work rapidly with university partners on proprietary problems and solutions. 4. Deep exploration, where the company creates rich and long-lasting relationships with univer- sity partners that, in turn, offer the business rights of first refusal to license collaboration re- sults. (see “Four models of University-industry Collaboration.”) 1.
the pharmaceutical companies novartis, Glaxosmithkline, Merck and Pfizer have invested together in open science initia- tives even though they are otherwise fierce competitors. suMMer 2012 MIt sloan ManaGeMent reVIeW 79 “academic research focuses on long-term challenges and thus may move more slowly, indus- trial r&D is driven by time-sensitive product development projects and day-to-day project solv- ing.” short-term collaborations are useful, common and relatively easy to facilitate if they are targeted and aligned to universities’ and academics’ ways of working. However, they require creative structuring, as the clock speed of academic research and business practice can be wildly diver- gent. Conversely, many academics think long-term, and this can be an advantage for a business as it may overcome managers’ tendency to look to the next quarter. “going long” with academics in the search for new ideas can unlock a range of possibilities and even help to create a new innovation ecosystem that will sustain the business five or 10 years into the future. However, such long-term collaborations require more patient investment and managerial attention to the design and governance of the col- laboration or they can go easily awry. The second dimension is the degree of disclo- sure of the results of the partnership. openness facilitates rapid publishing, which constitutes the lifeblood of public science7 and has the advantage of reducing transaction costs related to intellectual property. For companies, however, protection fa- cilitates the commercialization of discoveries. if we combine these two dimensions, we can see four different collaboration modes: 1. The idea lab, where managers put aside their de- sire for secrecy and work with academics to create new options and contacts. 2. The grand challenge, where managers and aca- demics work together to create a new knowledge base that will be shared in the public domain. 3. The extended workbench, where managers work rapidly with university partners on proprietary problems and solutions. 4. Deep exploration, where the company creates rich and long-lasting relationships with univer- sity partners that, in turn, offer the business rights of first refusal to license collaboration re- sults. (see “Four models of University-industry Collaboration.”) 1.
80 MIt sloan ManaGeMent reVIeW suMMer 2012sloanreview.mit.edu R E S E A R C H A N D D E V E L O P M E N T need to protect technologies they use. second, while academic research focuses on long-term challenges and thus may move more slowly, indus- trial r&D is driven by time-sensitive product development projects and day-to-day project solv- ing. as a result, companies can sometimes find universities too slow and too bureaucratic to be good partners. given that in the organisation for economic Co-operation and Development coun- tries, expenditures on higher education r&D represent about $160 billion per annum, businesses that don’t work with universities may be missing opportunities of significant proportions.6 These tensions are exacerbated by the fact that companies’ collaborations with universities are often pursued in an ad hoc, piecemeal manner, led by individual initiatives rather than any corporate strategy. managers who would never dream of leav- ing their customer or supplier relationships to chance may take an ad hoc approach to their uni- versity relationships, which can lead to duplication of effort, lost opportunities or squabbles over intel- lectual property. our research suggests that businesses can struc- ture their relationships with universities in ways that make them much more valuable. (see “about the research.”) To do this, companies must actively embrace universities, using the differences between industry and academia to their advantage. as Claus otto, program manager at royal Dutch shell plC, says, “it is important to ask yourself: What can these university centers do better or different than we can?” shell, for example, invests in university part- nerships in areas where it does not yet make business sense for the company to build extensive technology capability. To leverage value from universities, we argue that business executives need to consider two key dimensions. The first of these is the time horizon of the collaboration. “such long-term collaborations require more patient investment and managerial attention to the design and governance of the col- laboration or they can go easily awry.” open, short-term: Idea labs in this type of collaboration, businesses engage university part- ners to work on problems that are relatively short-term, while providing the option for the aca- demics to openly publish results. at first glance, this type of collaboration seems to provide little benefit to companies, given that they are not able to exclu- sively appropriate research outcomes. However, open exploration has a series of advantages. First, it can act as a “honey pot,” helping to attract academ- ics to the problems and challenges of the business. as these projects are well aligned to academic norms, many scientists find ways of drawing aca- demic capital even from incremental, applied research. second, not unlike speed dating, open ex- abouT The ReseaRch this article draws on a series of research proj- ects the authors carried out in recent years. two waves of a mirrored sur- vey were conducted in 2004 and 2009, collecting responses from hun- dreds of companies collaborating with univer- sities and thousands of academic scientists.i the authors also conducted hundreds of formal inter- views of at least an hour’s duration with company executives, entrepre- neurs and academic scientists in europe and North america. they ana- lyzed this material using inductive research tech- niques, including a study of how academic scien- tists generate academic capital from working with industry,ii an in-depth study of the structural Genomics consortium and a comparative study of university-industry centers. finally, the authors draw on exten- sive secondary material, stemming from a sys- tematic literature review of all peer-reviewed articles published be- tween 1990 and 2011 on academic scientists’ en- gagement with industry.
•Simple and standardized contracts •Open calls •Outline research priority areas •Internal selection •Special-purpose vehicles •High-leverage industry consortia •University endowments or centers •Consulting agreements with individual academics •Contract research agree- ments with university •Student projects •University center sponsorship •Framework agreements allocating decision rights to downstream intellectual property examples •HP Labs Innovation research Program •IBM Faculty Awards •Structural Genomics consortium •Shell Grand Challenge •Nokia applied research contracts •Often practiced within larger collaborations •Pfizer-Scripps partnership •Rolls-Royce University technology centers FouR Models oF univeRsiTy-indusTRy collaboRaTion each of the four models of industry-university collaboration discussed in this article has benefits and drawbacks. the best format for your company will depend on both your goals and your capabilities — and the goals and capabilities of your academic partners. “the emphasis in managing the project should not be on timely delivery, but on the results.” Companies, too, can capitalize on this kind of collaboration, provided the objectives are well defined and the interaction is carefully gov- erned. For instance, the structural genomics Consortium is an initiative by pharmaceutical com- panies glaxosmithKline, merck and novartis to carry out basic research on proteins relevant to drug discovery.11 yet all results from this research are placed in the public domain with no restrictions. What do companies gain from sponsoring such open innovation projects? For companies, it can make sense to fund open, long-term research even though they may forfeit the ability to appropriate the results in a legal sense. one situation in which this makes sense is when leading industry players become aware that collective action is needed to address fundamental challenges experienced by the entire industry.12 in pharmaceuticals, for example, executives are well aware that the cost of developing drugs is constantly rising while research productiv- ity is declining. in this situation, malcolm skingle, director of academic liaison at glaxosmithKline, believes it may make sense to invest collectively in building an industry commons to instigate a game change in the speed of new knowledge creation. His counterparts at merck, novartis and pfizer agree and have invested together in open science initia- tives even though they are otherwise fierce competitors. second, companies may seek to create new fields and markets by funding new research programs. such research is bound to diffuse more quickly and widely than results from more protected initiatives, and it allows companies therefore to shape emerg- ing fields. For instance, iBm has funded major research initiatives in service science, allowing it to shape problems and agendas of this newly emerg- ing discipline.13 open research programs can attract follow-on research by academics that may not have been part of the original initiative.
82 MIt sloan ManaGeMent reVIeW suMMer 2012R E S E A R C H A N D D E V E L O P M E N T COURTeSy OF HewLeTT-PACkARD COMPANy at over 70 different institutions in 20 countries. How should companies undertake such short- term open explorations? First, it is important for companies to explain the problems in a way that will help academics work toward useful solutions. sec- ond, contracts with the university should be kept as simple as possible. Third, the emphasis in managing the project should not be on timely delivery, but on the results. academics also appreciate it when the project is not overly specific, leaving them with dis- cretion as to the methods and objectives. obviously, there are risks associated with this type of collaboration. From a company’s perspec- tive, outcomes are likely to be highly skewed, with a number of projects that will yield some results but that will not necessarily produce eureka moments, and a number of failures. However, if a series of proj- ects are pursued in a portfolio, this risk can be mitigated, in part because the cost of each project is rather low. an executive at a major oil company told us that he was happy if 20% of such exploratory projects resulted in some positive output after two years. The unsuccessful 80% are terminated. a further risk is that a company may fail to ab- sorb the lessons from these kinds of projects, as in many cases follow-on projects are required to gain the full benefit of the research. To ensure that these risks are overcome, managers should seek to deepen and extend the most promising relation- ships by assigning an internal champion to work alongside the external academic partner and creat- ing a more long-term arrangement. 2. open, long-term: Grand Challenges Working on open and long-term “grand challenges” is the sweet spot for most academics, who often thrive on big problems. “Companies, too, can capitalize on this kind of collaboration, provided the objectives are well defined and the interaction is carefully gov- erned.” such follow-on knowledge creation can be a powerful mechanism for shaping open source platforms, at- tracting others to certain norms and standards and thereby seeding a new innovation ecosystem.14 For example, after arup group ltd., a leading engi- neering firm, decided to launch a new fire engineering service group in the late 1990s, it in- vested in a long-term program with universities to generate a new innovation ecosystem around building fire safety. (see “How arup Fire invested in a new innovation ecosystem.”) a further rationale for funding open, long-term university initiatives is to address fundamental chal- lenges that are of high social relevance, such as the environment or energy. For instance, oil companies have funded large programs on various forms of al- ternative energy or carbon abatement. one example is a five-year grand challenge on cleaner fossil fuels between royal Dutch shell and imperial College london. launched in 2007, the project focuses on every year, hP labs solicits ideas from academics on selected research projects with the aim of building new research collaborations.
In Partnerships
sloanreview.mit.edusuMMer 2012 MIt sloan ManaGeMent reVIeW 87 ing to make their mark in the research community and senior scholars may wish to sustain a lab. an additional risk factor that companies face is a possible public relations backlash fueled by allega- tions that industry funds may bias independent university research and capture open science agen- das.23 managers in some industries, such as pharmaceuticals and oil, have to be particularly care- ful in this respect. When the agribusiness arm of novartis entered into a landmark $25-million con- tract with the Department of plant & microbial Biology at the University of California, Berkeley, in 1998, it seeded a controversy revolving around the ap- propriation of open research by private interests and led to an external review.24 Concerns were also raised when exxon mobil Corp. and other firms signed a 10- year, $225-million deal with stanford University to fund the global Climate and energy project. There are ways to overcome many of these prob- lems. First, because many academics work with industry primarily to further their academic re- search programs, it is important for businesses to offer academics access to interesting problems, data or equipment. providing them with interesting clues or problems will often result in solutions that inter- est both the business and the academic community.25 second, any decision to patent a discovery or restrict publications due to confidential information in a deep exploration partnership requires fast approval processes so that academics are not left waiting to know whether they may publish or not. Businesses must agree with their academic partners on a streamlined system for managing disclosures, whereby academics are allowed to publish impor- tant but noncritical findings around an invention. academic scientists also need access to protected in- ventions to develop follow-on applications and discoveries. “companies need to ensure that contracts are clear regarding who will have what rights to any arising intellectual property, how royalties from licenses are to be distributed and how the project relates to the scholar’s other com- mercial activities and ventures.” more generally, univer- sity relations are too important to be left to chance. By balancing considerations such as time horizon and degree of openness, managers can turn univer- sities into valuable partners in both the short and long run — provided the relationships are designed in advance to meet both organizations’ goals. Markus Perkmann is a senior research fellow and Ammon Salter is a professor of technology and in- novation management at Imperial College Business School, Imperial College London. Comment on this article at http://sloanreview.mit.edu/x/53417, or contact the authors at [email protected]. aCknoWledGMents we acknowledge support from the U.k. economic and social research council via the advanced institute of Management research (res-331-27-0063 and eP/ C534239/1), the U.k. engineering and Physical Sciences
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