How Large Materials Companies Block Innovation

This Article Discusses Ways Large Companies Can Accelerate Materials Innovation

As an advanced materials startup, it sucks working with large materials companies. I’m sorry, but it is true. Large materials companies are completely ill-equipped in assessing and integrating advanced material developed outside their organization. I have worked in and with several large organizations and the story is always the same; Slow response, delay, preliminary results, more testing, delay, delay, delay, advanced results, continue. I have seen it take a year before getting a decision. Meanwhile startups are burning through limited cash reserves, sweating bullets, and trying to manage investor expectations. Rarely does a startup have the kind of time large company common use to assess a new technology.

The slow pace of large companies breeds increased startup mortality and decreases innovation in the space. No investor wants to wait for 2 years before knowing if the startup has a route to revenue. While we wait 2 years for results investors spend an additional $1 to $2 million dollars in capital. This is a large ask before anyone knows if the startup is a good investment. In a culture of fast-failure, this is too long and too much.

If the large company likes the product they usually move a second phase of more advanced testing. Advanced testing means more material, more testing, and (yes) more waiting. This makes the startup allocate additional funding with little to show investors. While larger companies state they are “investing time and resources,” the result is the same. Startups run out of steam because the time to commitment is too long.

Below is a diagram reflecting a common innovation storyline in the materials space. The slow pace of technology assessment results in premature startup mortality. The important thing to recognize is that this loop de-incentives innovation in the space. After a failure, the inventor is less likely to start another venture. The cycle creates a destructive feedback loop in the materials space where new advanced materials aren’t even brought to market.

Large Companies Inhibit Innovation Cycle of Slow Response in Assessing Nanotechnology.png

 

Large companies like to rely on the statement; “we can’t invest in a new technology if we don’t know if it works.” I totally understand that, no one is expecting anyone to invest blindly into a new technology. In fact, every startup I have worked with wants to prove to you that their technology works. The problem is pace. Time is the ultimate enemy of a startup, time costs money, time costs momentum, time increases risk.

I have found that the pace of innovation assessment by large companies is a combination of internal factors within a large organization, including; 1) a not-invented-here complex, 2) small, underfunded R&D team, 3) no direct responsibility for assessing new technologies, 4) they are over-worked already.

The bigger problem with pre-mature startup mortality is that it inhibits economic growth. Large materials companies continue to struggle to meet 2-5% YoY growth. This forces a culture of cost-focused management. When large companies defend themselves by saying that time and resources is being invested, they are looking at the cost end of the spectrum. With over 30 years of consolidation, large company leadership has only been trained to reduce cost and cut overhead.

This also means they have no idea how to foster innovation. Imagine how much upside revenue, market share, and competitive advantage they can gain if large organizations started capitalizing on new technologies. I have seen many promising technologies die because of funding gaps. Most never even receive clear feedback from large organizations. Many of them could have created a new market, provided a differentiated product, or reduce cost.

The thing is, it doesn’t have to be that way. Large companies have more resources and more human capital than most other organization in the world. We need to break this negative feedback loop with some new pro-active approaches. So, here are a few ways large organizations can enable innovation in materials space.

 

Publish Focus Areas of Innovation

One of the biggest issues with nanotechnology innovation is that they don’t know what problem they are trying to solve. I know of one startup that took over 10 years to find their initial target market. That is a long painful process. A large part of the lag is that most inventors do not know which market cares about their technology. Instead, large materials companies can publish target innovations they are currently pursuing. This can be as simple as a list of needs or as complicated as a technical white-paper overviewing the problem. Having this kind of wish-list from an organization is gold for a startup. Being in the public domain, each company can easily connect their technology with a known need before reaching out.

Internally driving responsibility for maintaining this list would be the obvious challenge, but with the support of top leadership, it would be easy for middle-managers to collect the list and facilitate publication on their website. It doesn’t have to be perfect. Furthermore, there is little technical risk in discussing common industry challenges. Nobody is posting a solution or current state of internal R&D. Think of it as simply putting a hook in the water to see if anyone bites. This idea does not solve the problem of follow-up or testing, but it starts the processes. Ideally, if a startup comes with a solution that top scientists have already identified as a need, there is an increased likelihood that it will be picked up organically.

 

Support Targeted Competitions

Hosting a public competition to solve a problem is a great way to crowdsource new technologies. This type of innovation model has been shown to bring new, and impressive ideas to the table. In fact, everyone is doing it: XPrize, Startup NASA, Merck, NSF’s National Nanotechnology Coordination Office, even the FDA. In every situation, reviewers assessed multiple applications for their merit and awarded prize money accordingly. The weird thing is that the prize money rarely covers to cost of the research and development. It only nucleates an idea and fosters a competitive environment.

Materials companies can hold similar challenges over a 6-12 month period. Pick something big; something that scientists don’t think is possible. Post it through any number of non-profit organizations that support public technology competitions. Then, promote the heck out of it.

Personally, I think the best thing would be to list a set of target material properties for a give application. Organizing an application process based on that would be helpful. Then subject the applicants to a clear set of real-world, application-specific testing.

 

Provide Clear Guidelines for Staged Strategic Investment

The goal here is to provide some clarity around what is expected before being considered for strategic investment. This one is tricky for because companies do not want to “promise” money regardless of context of circumstances. But there are a lot of good lawyers to help draft the wording. The acceptance criteria can be organized as a funnel. Large companies would need to organize a committee of reviewers to assess a new technology over a range of attributes, including; cost, performance, scalability, target market need, competitive differentiation, IP, revenue growth, and displacement of current technology. But with clear criteria, this can at least help investors understand what large companies need before being committed. It would help provide some clarity to an otherwise uncertain marketplace.

Invest in a REAL Assessment Team

This is the “all-in” strategy. Here large companies invest in a fully functional, cross-disciplinary team to quickly assess new technologies. Many large organizations have some form of this group already. But they are usually poorly equipped and only have informal authority. Rarely do not have their own technology staff or resources. If the corporate external technology group finds something interesting, they have to shop it around business units for interest. This creates a horribly slow and painful game of relay between the startup and organization. I am NOT proposing this type of corporate-level, technology assessment teams.

I am proposing an elite sub-team within each business unit that is capable of quickly assessing a new technology for a target application. They are there to work with startups with a one to two-week turnaround. If early results are promising, they can progress to a fast-track technology assessment funnel where startups can get a clear yes or no answer within a month. For this team to function, it needs to be a spider across the organization. It would need someone senior, capable, and energetic to work across silos and push new opportunities. While the team needs to be independent in the technology assessment process it also need to be held accountable for spend and revenue growth. This all means it requires active engagement by the CEO, CTO, and CSO to succeed. The point here is to create an arm within a large organization that can work with startups on a startup style timeline and manner.

 

Summary

I scan the nanotechnology updates daily. Every week there are 2-3 major discoveries in the advanced materials space. Most of these innovations, however, will not see markets. The painful reality is that these major innovations face hurdles when it comes to commercialization. By accelerating the assessment process, large companies can capitalize on a massive network of innovation to drive revenue growth, differentiation, and long-term value creation.

 

That’s all for now, thanks for reading!

 

Thoughts on this article? Please post comments and questions below!

 

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