How to Invent a Profit

If Bill Gates had been British he’d be running the largest software company in Guildford by now.”

A former Design Council chair once remarked. We seem to be great in the UK at innovation but not so good at bringing ideas to market and making a profit.  Why are we so bad at commercialising innovation?

I think there are 4 main reason gaps for this –

1. Culture gap

Unlike the US we fear failure more and take rejection more personally. Maybe we need to learn to accept failure more as part of business and stop being so risk averse. Recognising that the US sets the standard for entrepreneurship, the UK government and the Kansas City based Kauffman Foundation have set up scholarship programmes for British innovators to learn from American entrepreneurs.  Some of the participants have been struck by the level of altruism among successful, self-made Americans. The participants say that in the UK people are more reticent to help in an altruistic way. The American mentors will give their time for free and open up their Rolodex and give them contacts.

2. Skills gap

Commercialisation for many inventors is a barrier as they have little experience of the commercial world and an adverse nature towards spending money on bought in expertise. Some view commercial assistance with hesitation and mistrust due to the blood sweat and tears that have gone in to creating their baby. Why should they just hand their baby over to someone else and also pay them to look after it? Sales and marketing is deeply mistrusted and misunderstood. Any new money that comes in will be used for more R&D, as this is their comfort zone.

3. Valuation gap

Inventors are often cash-strapped, good ideas people or academics with a major inability to communicate with business. Often inventors try to use money spent already on R&D to value their equity stake which just doesn’t cut it with commercial investors. They’ll over value their ideas and are reluctant to give up any of their ‘asset’ when it comes to wanting finance to move towards final development or commercialisation. They are largely adverse to releasing equity or control to attract further investment, preferring to own 100% of nothing as opposed to 50% of something.  We see this all to often in the Dragon’s Den!

4. Funding gap

Funding is often available from seed funds and grants to get the idea to a point of final development and to prove a first version. However after that time, any funding is given through a different scheme with its own specific sets of criteria which the companies are not at the right point yet to comply with. There is therefore a funding and assistance gap from final development to commercialisation.  Even before venture capitalists went into hiding, they only invested a fraction of their cash in early stage UK technology (£200m out of £34bn in 2007) and commercialisation capital often falls below minimum venture capital levels.

James Dyson was rejected by the UK government under the previous technology grant SMART scheme 6 times. His project was deemed commercially unviable as they could not see how he was going to take on the current market incumbents. However he did and sold 64 million units in 2008. Why was he rejected? Dyson spends around 11% on R&D per annum. A much higher average than others in the UK I would bet.

So what can be done?

Government – needs to look at more funding towards strengthening the link between R&D and business, as opposed to putting it all into R&D itself. After all, what is the point in inventing something if nobody gets to reap the benefits?

Market test early – the sooner you can bring a prototype to market, the sooner you’ll get good market feedback and the sooner you’ll be able to launch. Never underestimate the power of early customer experience feedback in helping to design a product or service that will be a market winner.  I have known too many inventors who polish their diamonds for years and years before even engaging with the market. Ideally build your value proposition from the beginning and refine it regularly with customer experience. My experience of working with early stage companies suggests that if they build their value proposition early in this iterative way, they get to market much faster and start generating profits much faster than companies who don’t.

Build whole-brain teams – innovators are often discerning, thoughtful and meticulous and have a certain intellectual snobbery about their creations. They are often not the best people to bring their creations to market and sometimes view sales and marketing with suspicion, even contempt.

Recognise that there is a need to bring the detail, rational types together with the more relationship focused, doer types into whole-brain innovation and commercialisation teams.

Some of the best innovation and commercial marriages are between the so called left brainers and right brainers. The Pixar director Brad Bird and the producer John Walker are “famous for fighting openly”, Bird has been quoted as saying, “because he’s got to get it done and I’ve got to make it as good as it can be before it gets done.”  (the CTQ tool can be used to help profile people to create whole-brain teams)

What are the other key ingredients to making the UK better at bringing ideas to market?


With thanks for input to this article from Ian Heywood, UK Grants Ltd.

Acknowledgements to The Design Council’s ‘Inventing a Profit’ paper and the Harvard Business Review article ‘Innovation in Turbulent Times’.