Thomas Baaken, Muenster University of Applied Sciences Anthony Francis, Flinders Partners Todd Davey, Muenster University of Applied

Sciences Thorsten Kliewe, Muenster University of Applied Sciences

A model for the assessment and extraction of entrepreneurial value from University research
Abstract
This paper details the assessment and extraction of entrepreneurial and innovative value from Universities and institutions of research. It provides insight into the approaches taken by two organisations on opposing sides of the world. Both have implemented and validated models in the competitive and demanding consulting market leading to highly successful ventures and special recognitions for their efforts. An analysis of the issues faced by research institutions in their quest of extracting value and a brief discussion of the approaches taken leads to the extraction of key learnings for any institution aiming to improve their performance in this context. Keywords: Extraction of entrepreneurial value, transparent process, use of tenets, alignment with the market early

1.

Introduction
The complex issue of extracting entrepreneurial value in the form of research-based technologies and innovations from the University and research organisations (from here referred to as research institutions) environment is a challenge faced by technology transfer offices, regional development agencies and Governments (from here referred to as agents of technology transfer), and, of course, by Universities and business organisations the world over. If entrepreneurship is understood as the process of uncovering and developing an opportunity to create value through innovation (Antoncic and Hisrich, 2001), fostering entrepreneurship and extracting its value can help Universities to face the problem of decreasing public funds (Carayol, 2003), help businesses to gain and maintain their competitive advantage in todays dynamic international markets (Tucker, 2002), and contribute to the economic development on the national as well as regional level (OECD, 2002). Therefore, the extraction of entrepreneurial value via the commercialisation of research competencies, capacities and results (Baaken, 2006) creates mutual benefit for all parties involved. Likewise, the entrepreneurial value of Universities and research institutions has been recognised by the European Commission in their Green Paper on Entrepreneurship in Europe (2003). Despite the illustrated prominence of technology commercialisation and university-industry links, very few careful research and practical usable approaches exist. In fact it is not a lack of technology offers or entrepreneurs / capitalists / companies (from here referred to as the partners of technology transfer) with needs to receive the technology, however it is the transfer and partnering process itself that requires most attention (Plewa, Quester & Baaken, 2005). Differing priorities between research institutions and industry and/or entrepreneurs have been sighted a reason for this (Belkhodja & Landry, 2005). For instance, research institutions are, contrary to result- / market-oriented businesses, more process-oriented and primary focused on new knowledge (Plewa, Quester & Baaken, 2006). These different types of research objectives, coupled with differences in organisational cultures (Plewa et al, 2005) relate to different behaviour exhibited by researchers and business people. This, in turn, has a significant impact on the creation of partnerships and a successful transfer of technologies. These issues have proven to be very complex, with a deep-rooted misunderstanding between the two not being sufficiently and adequately addressed (Cyert and Goodman, 1997). Therefore, a strategic approach is needed in order to assess and extract entrepreneurial value from University research most effectively. The successful approaches by two organisations on opposite sides of the globe makes for more than just interesting reading as it allows the extraction of key learnings for any research institute aiming to improve their success rate. The strategies used by the Technology Commercialisation Group (TCG), Australia and the Muenster University of Applied Sciences (Muenster UAS), Germany, provide an insight for all those attempting to extract entrepreneurial value from research. Both use a similar methodology of creating a more transparent process and communication stream between the key players in technology transfer at an early stage of technology transfer. The underlying principle for all

activities is to align the technology with the market early in an open and transparent communication process. This paper will not look in detail at a model for classical entrepreneurial value extraction, such as creating University value in the form or spin-offs or licenses. Rather, it advocates a move towards a more holistic view of the Universities role in technology transfer which also encompasses partnering and working intimately with industry.
2.

Issues Faced
Within the University and research sector environment included, both organisations were confronted with several typical issues, outlined below. First, Universities struggle with the question of how to assess entrepreneurial opportunities emanating from the University and research sector environments. This is a widespread problem confronted by all those assessing and/or developing technologies from an early research stage. Common issues can be grouped around three themes: (1) the market and how the technology relates to it; (2) the development potential of the technology and how novel it was from a market as well as IP perspective; (3) the people including issues are how motivated they were towards creating commercial value, how easy they were to work with, how developed partnerships were with industry and their current status within the institution. Second, different value systems exist between Universities and the commercial world (knowledge versus profit), requiring alignment. A much documented issue between the research and commercial worlds (Plewa, 2005; Lee, 2000) is that of a different priority set that exists between the two groups The third issue relates to the difficulties in extracting new ventures from the University environment. Issues around the extraction of value for new ventures included the lack of alignment the research had with the market, values, expectations and desired project outcomes of commercial partners. Fourth, the handling of Intellectual Property (IP) has been very much a patent-first mentality with many institutions motivated to increase patent numbers without really considering the likely commercial interest for the patent or the expense outlaid prior to patenting. Fifth, there appears to be a distinct lack of entrepreneurial thinking within Universities. This was primarily found to be a result of the assessment of researchers and Professors being based around the number of publications, presentations and patents they possessed rather than their ability to contribute new technologies to the market. Sixth, balancing blue-sky research with creating commercially focussed new ventures is a real challenge for Universities. As a growing number of Universities and research institutions turned their attention to more commercial opportunities, there was a need to balance the focus not to preclude the ability to conduct so called blue-sky research, that can lead to radical innovation. Seventh, a lack of relationship and network building activities vital to fostering entrepreneurial activity, including key frameworks and structures that assist entrepreneurial thinking, were not in

existence. There was a need to create these frameworks in order to ensure that entrepreneurial thinking became more accepted and regularly practised. Eighth, navigating the path-to-market for new ventures and understanding when to partner was a further issue. With a well established research framework that didnt consider partners or the needs of the market until applied research stages (or later), the challenge existed to incorporate market feedback earlier in the process to ensure research was developed in alignment with the needs of the market. The final issue relates to the lack of linkage to financial community and markets such as venture capitalists and business angels.

3.

Solutions offered
Technology Commercialisation Group (TCG) Technology Commercialisation Group (TCG) was one of the first consultancies worldwide to primarily focus attention on providing support for the commercialisation of technology and innovation and the extraction of entrepreneurial value. Formed in year 1998, the consultancy successfully worked with some one Australias biggest research institutions and Agents of Technology Transfer, creating a platform of approach used by Queensland University of Technology, Adelaide University, South Australian Research and Development Institute (SARDI) and WA Department of Industry and Resources (WA DoIR). TCG become one of Australias largest providers of innovation and commercialisation support, solutions and training, before being purchased in 2004 in a strategic acquisition by Deloitte Australia. Whilst interest in harnessing University knowledge for economic development started to take shape in the 1990s, changing policies and focus within Universities gained momentum at the turn of the century (Mian, S. A. 2006). The growth of TCG was largely due to the changing focus of Universities toward this third-mission, as they expand their objectives to play broader roles in the competitive knowledge-based economy (Mian, S. A. 2006). The lack of established commercial skills within the University and research institution environment and experience with commercial projects created a need that TCG stepped into. Solutions Offered As a response to the issues confronted by TCG within the University environment, a number of tools and mechanisms were developed in order to improve the extraction of entrepreneurial value:

Environmental audits designed to assess how well the research institution (or faculty within the research institution) is placed to take advantage of commercial arrangements for its technologies The creation of a model for the assessment and development specifically of opportunities within the University and research sector that considers the market opportunity and the project needs and balances them with the needs of the University

Developing hands-on training workshops working closely with potential entrepreneurs using their own projects Developing board-room scenarios to test the viability of new entrepreneurial ventures The creation of new-venture assessment software, Insight IPM , to assist Universities and research institutions with the task of assessing and improving entrepreneurial ventures Fostering of champions and staff enthusiastic about commercialisation and commercial activity Opportunity audits designed to understand the potential commercial opportunities that may exist within the research institution. This audit is designed to create an inventory of opportunities understanding their stage of development and the issues that may exists with the opportunity Commercial development labs bringing together business development/

commercialisation staff with researchers to develop a concept using a defined commercialisation process

Hosting opportunity-mining workshops within Universities utilising market issues to create entrepreneurial opportunities Creating mechanisms to develop relevant entrepreneurial offerings whilst working closely with the market Creating transparent mechanisms for the exchange of entrepreneurial ventures from the University environment to the market

Figure 1: The path to exploitation of value

Muenster University of Applied Sciences Muenster UAS has a leading position among German Universities through a market need oriented and enduring design of education as well as the transfer of knowledge and research. Founded in 1971, the University was recently recognised for its work in creating value through research. It was awarded one of the Top 5 Universities in Germany applying the best strategies of university-industry knowledge exchange and technology transfer by the German Federal Ministry of Education and Research and the Donors' Association. Muenster UAS has grown its third party funding from 3.4 million Euro in 1998, up to 11.3 million Euro (2006), the amount more than tripling, which is a third of the University's budget. The University has two offices specifically dedicated to the extraction of value, the Transfer Agency and the Science-to-Business Marketing Research Centre. Solutions Offered

In 1998, Muenster UAS created as the position of Vice Rector Partnering. The position is responsible for establishing and extending (strategic) partnerships with corporations, networks, communities, entrepreneurs and Universities. Recognising this development, the Ministry of Science & Research in North Rhine-Westphalia (NRW) established the Science Marketing Research Centre at Muenster UAS in 2002. The research centre develops, tests and provides new models, instruments and proceedings for more effective research commercialisation and entrepreneurial value extraction. Reversing traditional models to use the technology transfer office as a support mechanism rather than a bottleneck. The focus being on Partnering with industry or entrepreneurs rather than being centred on IP. Student-based entrepreneurial projects to stimulate idea creation. In a program called Making Money, students are given a sum of money to develop a new venture and are then tracked over a semester. Creation of modules within degree and masters programs that fosters the extraction of value from Universities. In order to encourage professors and researchers across all faculties to intensify research and partnering with external organisations, Muenster UAS started a research initiative:

As one instrument of the research push, the University established the so called room trading model, which defines that researchers get 23qm for every 35.000 Euros in acquired third party funds (incl. funds from the federal state).

Furthermore, technical researchers receive 6% (non-technical 12%) fund allocation from central funds in addition to the acquired third party funds. Other research achievements such as publications, patents, lectures, and participation in trade fairs are also evaluated and remunerated in proportion to the acquired third party funds.

Since research activities should not be negatively affected by other work, the opportunity exists to reduce the teaching load in order to focus more on research.

To make sure, that the research conducted does fit the needs of the business partner / entrepreneur / the market, Muenster UAS and the Transfer Agency focus on a partnering strategy which integrates the key players at an early stage of the technology transfer process. This strategy is contrary to the traditional model where research is conducted partnerless and the technology transfer starts only when new knowledge has been gained or a new technology has been developed (compare figure 2). This alone means that the University is much more likely to do things which are valued by the market.

Traditional Business Model of Technology Transfer Science Knowledge/Technology Industry/entrepreneur

Market Entrance Science Knowledge/Technology Industry/Entrepreneur

The MUAS Model of Technology Transfer

Dotted lines represent insecureness in the process

Figure 2: The MUAS model of technology transfer

The approach of MUAS is to develop long term strategic partnerships with key partners to eventually work together to not only find research solutions but firstly to identify the market problem to be solved. To find the most appropriate partners for this approach, Muenster UAS makes use of a number of tools:

Following a Germany-wide innovation positioning survey to plot the innovation performance of firms as well as Universities across the country, the use of a positioning matrix to align industry with Universities Seeking synergetic as well as complementary strengths and weaknesses to locate potential partners Using the supply and value chain of industry to locate potential market partners 1 on 1 Project Opportunity Workshop (POW) with a potential partner. Aiming to interact, create a personal relationship and come up with potential projects, workshops generally starts with short presentations by researchers

4.

Comparison & discussion

A comparison of the previously discussed approaches allows for the extraction of key learnings summarised as follows:
1.

Top-level buy-in Establishing a technology transfer champion at the highest level of the organisation and a long term strategy for technology transfer within the University

2. Increasing entrepreneurial spirit incentives for researcher to commercialise their technology,

3.

increasing

understanding

and

awareness

of

commercialisation

and

entrepreneurial activity (reducing fear) and promoting successes Establishing technology value What is the real value of the technology to the market. Talk in terms of benefits. What is the project value to the commercial partner v the researcher
4.

Assessment of technologies - involves assessment using market feedback starting at an early stage and using the assessment to continually improve the technology

5. Aligning values:
I.

Alignment with revenue needs What are the revenue needs of the project, the faculty, the transfer agency versus the revenue expectations of the commercial partner Alignment with long term strategic position Do the projects align with the strategic objectives of the research institution Alignment with partners Establishing the expectations of the project partner/s Alignment with markets (market back approach) Involving project partners early in the development of research. Involving researchers in Commercial Development Labs to consider market needs

II.

III. IV.

6. 7.

Project Alignment Aligning the needs of the project with the resources available Timing Working closely with the market and allocating resource priority over three horizons with priority given to technologies assessed to have high potential Transparency Auditing and then raising awareness of the technologies that exists within the institution. Creating a transparent and open process for the transfer of technologies in respect to IP, having a central point of contact and a standard method for communicating with the research institution

8.

9. 10.

Managing risk Evaluating project risks and establishing mitigating strategies for each risk Sustainability Creating long term strategies, policies, mechanisms and tools that create a more sustainable entrepreneurial culture

Figure 3 details these findings in a graphical model: University or Building trust and recognising value research institution Creating transparent access to university technology
Top-level buy-in Increasing entrepreneuria l spirit Establishing technology value Assessment of technologies Alignment of values and project

Facilitating interaction to solve market problems Methods for Identifying and developing partnerships Understanding expectations and cultural differences Establishing clear communication channels Figure 3: Key learnings

Partner

5.

Conclusion
This paper presented different instruments and models to overcome the complex task of assessing and extracting entrepreneurial value from University research. The approaches taken by TCG and Muenster UAS show how Universities today successfully face this challenge and how specialised consultancies can support them in their quest. While this paper provides valuable insights into the area of research commercialisation and the extraction of entrepreneurial value, future research is clearly needed in order to further optimize the transfer of knowledge and technologies from science to business or into a new venture. For example, further research should be undertaken to assess and compare already existing approaches at Universities and research institution, and thus an analysis of worldwide best practice. Furthermore, technological development provides vast new opportunities for the support of Universities, technology transfer offices and researchers. Software helping to advance the assessment and extraction of value from University research should be developed and used to create a more in-depth understanding of success factors. Finally, with long-term partnerships advocated as an extremely successful approach, future research should analyse the value created in a partnership over time. Such research should take into account changing expectations, needs and partnering situations throughout the partnership.

Acknowledgements
We would like to thank Dr. Carolin Plewa, Flinders Partners, for her most valuable help in writing this paper.

References
Antoncic, B. and Hisrich, R.D. 2001. Intrapreneurship: Construct Refinement and Cross-cultural Calidation. Journal of Business Venturing; 16(5). 495-527. Baaken, T. 2007. Science Marketing as a key factor in future technology transfer and innovation. In AMSTAC (Ed.): Innovative Management of Technology Transfer, Beijing, pp. 290-304.

Baaken, T. and Plewa C. 2006. Key Success Factors for Research Institutions in Research Commercialization and Industry Linkages: Outcomes of a German/Australian Cooperative Project. In: Sherif, M. H./ Khalil, T. M. (Ed.): Management of Technology. New Directions in Technology Management, Amsterdam et al., pp. 75-89. Belkhodja, O. and Landry, R. 2005. The Triple Helix collaboration: Why do researchers collaborate with industry and the government? What are the factors influencing the perceived barriers? Paper prepared for presentation at the 5th Triple Helix Conference, Turin, Italy. Carayol, N. 2003. Objectives, agreements and matching in science-industry collaborations: Reassembling the pieces of the puzzle. Research Policy 2003: 32. 887-908. Cyert, R.M. and Goodman, P.S. 1997. Creating Effective University-Industry Alliances: An Organisational Learning Perspective. Organisational Dynamics, 26 (4), pp. 45-57. Deloitte & Australian Business Foundation. 2006. The reality of innovation unzipped: An investigation in middle market Australia. Melbourne. European Commission. 2003. Green Paper: Entrepreneurship in Europe. Brussels: European Commission. Lee, Y.S. 2000. The Sustainability of University-Industry Research Collaboration: An Empirical Assessment. Journal of Technology Transfer; 25 (2), pp. 111-133. Mian, S. A. 2006. Can Entrepreneurial University Model Help Pakistan Leapfrog Into The Knowledge Economy? OECD. 2002. Benchmarking Industry-Science Relationships. Paris. Plewa, C., Quester, P.G., and Baaken, T. 2006. Organisational Culture Differences and Market Orientation: An Exploratory Study of Barriers to University-Industry Relationships. International Journal of Technology Transfer and Commercialisation; 5 (4), pp. 373-389. Plewa, C., Quester, P.G. and Baaken, T. 2005. Relationship Marketing and University-Industry Linkages: A Conceptual Framework. Marketing Theory; 5 (4), pp. 431-454. Tucker, R.B. 2002. Driving Growth Through Innovation. San Francisco.

Authors contact information Professor Dr Thomas Baaken, Muenster University of Applied Sciences Anthony Francis, Flinders Partners Todd Davey, Muenster University of Applied Sciences Thorsten Kliewe, Muenster University of Applied Sciences Correnstr. 25, 48149 Muenster, Germany davey@fh-muenster.de Fon +49 251 83 65683