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Transition to market

The difficulties of an academic spinoff and the goals it should set to achieve success

Carreiras 2 jpgDaniel BuenoA management tool to assist founders of academic spinoffs: this is the practical result of the article entitled Inovação como transição: uma abordagem para o planejamento e desenvolvimento de spin-offs acadêmicas (Innovation as transition: an approach to planning and developing academic spinoffs), published in February 2015 in the journal Production. The path laid out by researchers from the Innovation Management Laboratory (LGI) of the Polytechnic School of the University of São Paulo (Poli-USP) can help new entrepreneurs build a strategy to plan the business and deal with uncertainties in the market and technology—both in-house and collective—in the sector in which they will operate.

Usually founded by researchers or university students or graduates who wish to turn a specific scientific work into a commercial product, spinoffs must overcome a series of difficulties before they can forge ahead and be successful in the market. Production engineer Leonardo Augusto de Vasconcelos Gomes, a professor at the USP School of Economics, Business Administration and Accounting (FEA-USP), was working on his PhD at Poli-USP at the time and was the principal author of the article. He says that the management tool that was proposed in the work sets out a series of steps for the entrepreneur to plan and run the business. In this way, it provides assistance for traveling the long and winding road of turning an outcome of academic research into a highly successful business venture. The article addresses the development of the product and the company simultaneously, including administrative and financial aspects.

Step 1 is to understand the main trends or technological and market pressures that may open a window of opportunity for an innovation that the spinoff has devised or will develop and produce. Step 2 is to identify existing guidelines; these may be new technical requirements for current products or requirements that have or have not been met. And Step 3 is to ensure that the innovation will bring about a change, for example, in the market. “Steps 1 and 2 explain how the market and production chain are working,” Gomes says. “Step 3 explains what the spinoff and the technology under development will change compared to existing products.”

Step 4 consists of checking that emerging solutions are consistent with the company’s proposal, because there may be other technologies or business models that are out to conquer the same market. “Step 5 is to identify the ecosystem, in other words, the network of suppliers and clients, for example, that are needed to be able to develop and market the new product,” Gomes explains. “And the final step is basically understanding each stakeholder’s agenda and building an action plan to manage an academic spinoff.”

As for the uncertainties, Mario Sergio Salerno, coordinator of the LGI and co-author of the article, states that there are four categories: one is technology, since it is impossible to know if it will succeed. Another is the market: whether the product will be accepted or not, at what price and under what conditions. Yet another is the uncertainty regarding resources: will there be money or the skills to develop the product and the business? And then there is organizational uncertainty, in other words, the company may not have a good decision-making system, or it may change its strategic policy, for example. “A nascent technology-based company will succeed only if it is able to curb these uncertainties,” Salerno says.

Fabíola Spiandorello, Intellectual Property Manager at the São Paulo State University (Unesp) Innovation Agency, suggests that spinoffs may face another obstacle. “In many cases, the product is so innovative that there is no market for it yet,” she says. In such a case, Salerno says that an entire “ecosystem” must be developed and that other businesses, suppliers, financiers and regulatory bodies must be involved. “The invention of the electric light bulb is a historical example,” he notes. “Not only was it necessary to produce light bulbs, but improvements were needed in the energy generation and distribution infrastructure, and a system for metering and monitoring power consumption had to be developed as well.”

In addition to having a good product at a reasonable price, there is no formula or recipe to guarantee that a spinoff will make a successful transition from academia to the market and find its niche. However, Spiandorello mentions a few strategies that can help: “first, entrepreneurs need to change their mindset,” she suggests. “They are no longer lab researchers focusing on the results that come off the bench. Now the goal has to be to get the business to survive. It is also necessary to understand that different types of knowledge need to be pulled together to do so, including administrative, financial and legal knowledge, and there is fundraising as well.”