In international innovation race, U.S. researchers need entrepreneurial mindset, national vision

In an exclusive interview, Stevens Institute of Technology's Malcolm Kahn says that the only way for America to compete on the global stage is to introduce innovators to the "deal flow" mindset.
Written by Andrew Nusca, Contributor on

What is the modern university's place in the world of innovation?

To nurture minds? Market skills? Both? (Neither?)

Yesterday afternoon I sat down with Malcolm Kahn of the Stevens Institute of Technology in Hoboken, N.J. to discuss exactly that.

Officially, Kahn's title is Vice President of Enterprise Development and Licensing. His task is to take students in the university's 10-year-old Technogenesis program and give them real-world experience to help them push their inventions beyond the classroom.

The goal of the program is to give its graduates the skills to "renew American innovation, competitive spirit, and productivity" and make the university a "global force."

I spoke with Kahn about how that mission informs his work and why he thinks American innovation needs a shot in the arm.

SmartPlanet: You've been running training programs in Malaysia. Tell me about that.

MK: We're actually training their researchers, professors, administrators, government officials and businesspeople on how to become technology entrepreneurs.

We ran a program that extended about 10 weeks -- we went there and gave a preliminary two-day session to three groups of people, 120 people overall. We gave them the building blocks of the business plan and taught them about customers and finding out customer pain and discovering problems to be solved, which is the disconnect for most university-based research. We then mentor them for a six-week period from here [Hoboken, N.J.] and then go back for three days.

It was very hands-on. There were 16 groups in all, and we use their technologies to do this. A fantastic success. At the end, we prioritized what were the better technologies.

Stevens really prides itself on building entrepreneurs out of technical people. We want them to understand entrepreneurship and to have a view on what it takes to get a product to market. It's a very important part of the education process here.

The training in Malaysia is part-education, part-partnering. We're trying to bring some technologies back to Stevens which we can then partner on in terms of development and commercialization.

SmartPlanet: Let's get right to the core of your job: how do you balance academic goals with commercial ones?

MK: The creation of knowledge, dissemination of knowledge, commercialization of knowledge: if you don't live the vision, you're teaching entrepreneurship with a textbook. That's not how you build entrepreneurs.

In one program, I gave the kids a technology with unbelievable promise. Those kids took the raw technology -- built by a really bright professor at Stevens, and his post-doc team -- and brought it to MatLab, ported it and put it into a programming language that is extremely scalable [and] that everybody writes in. They did the market research, ran focus panels with real customers, understood customer pain and perceptions, talked to students, lawyers, insurance companies -- the primary market for this.

That to me is living the vision. That to me is bringing the education back to your students.

The typical experience that students go through is that they come into a business class, write a business plan and analyze either IBM or a bicycle shop. What we're trying to do is to really create teams of people that will take technology and have to go through the steps to understand what the other side is like.

You can't develop technology in a vacuum, and that's what most research institutions clearly don't get.

I was also [recently] in Singapore. I met with a researcher who is so well-funded -- by A*Star, their National Science Foundation -- and he worked with water technology. I asked him, "Have you ever visited a lab and seen them actually do this kind of testing?" He said no. I asked him, "Have you ever gone out into the field?" He said no. Trust me, this technology would never work in a million years in the real world.

There is a need for pure research -- places like Princeton, MIT, Harvard. [But] Stevens takes pieces of technology and provides solutions. That's what engineering is all about. Unless you have true commercial businesses -- really developing products -- then you're not following through.

The students don't get that disappointment every day. They don't understand that the world out there is not perfect. One student came back to me and said, "We have a competitor." And I said, "Yeah?" This is a nascent market, and they walked in here totally depressed. There are other people doing the same thing! "But our mousetrap is better, or is positioned better." It brings the true reality of the entrepreneur. It's a roller coaster: the highest of highs, the lowest of lows, and it happens in the same day.

An entrepreneur paints a vision. You know it's a bumpy road. That cannot be taught in a book.

SmartPlanet: The university's mission is to renew American innovation, competitiveness and productivity. What happened -- and how can it be changed for the better?

MK: The importance of the commercialization in America, in my opinion, is related to...we've lost our manufacturing base.

Only through bringing new technologies out can we keep ourselves moving forward and hopefully bringing some product. Small companies employ 80 percent of the U.S. population. I would love to see universities churn out company after company. A lot of the innovation created in universities today never sees the light of day. It is the opportunity for the U.S. to reclaim some of this manufacturing it lost.

Right now, the number of patents in the U.S. is significantly lower than the rest of the world -- China, Japan, Taiwan, India -- they are all patenting away, working their buns off, doing some very good work. The strategy of Japan after the war was a strategy of non-research. It was all applied research. They didn't do fundamental research; as a country, they wouldn't fund it. They didn't have time to do that.

In the United States, you need some of that. A lot of that. That's where true breakthroughs come.

My argument is with the approach that universities take with licensing. "Throw it over the wall and it's Mikey's problem." But if you break that licensing success down, and take out the few blockbusters, they're losing money.

University-based startups are 100 times greater return than any kind of licensing deal. And given the same technology, they will be more successful in bringing that product to market than will a licensee.

Big companies license products by the boatload. There are a million reasons why they give up and the startup succeeds.

SmartPlanet: So what is the value of the university in innovation: idea incubator, or startup mill?

MK: The university role in the U.S. is really a dual role.

Licensing technology from a university has virtually no value to industry. It's viewed by industry as having to be reinvented, re-engineered for manufacturing, marketing and investment has yet to be done. What is the fundamental basis of value? I'll give you the answer: risk. Who's taking the risk? Value is created by de-risking your technology and your business model.

You go through [venture capital firms] today, or sophisticated investors, and the money's no longer flowing. Nobody wants to pay for risk. Now a VC wants to make sure he's not going to lose money. That's a big change. Everybody has become salami investors -- you need $2.5 million, well here's $250,000, show me your next milestone.

The university can get through and improve the model, get through this "Valley of Death." They do not consider de-risking as a strategy. Because of that, the value they get for their product is typically very low.

Certain universities used to think "commercialization" was a dirty word. And that's great, because that helps everybody. There's a role there. Princeton, for example, is very good at that. But Harvard's caught on. Their spinoffs are money machines.

This whole movement really started, quite frankly, on the West Coast. Even today, if you go on the West Coast, you will meet a bunch of people that have failed. And their failure actually does not carry a stigma -- it's kind of a chevron on their sleeve. You go to other countries, the risk of failure is considered to be a huge negative. It's like big corporate here on the East Coast. Boston is slowly coming out of it. Their guys get it. They caught on very quickly that "there's money in them there hills" for commercialization.

SmartPlanet: So what do you tell students? Go commercial, or go home?

MK: Let's think about that fundamental question of commercialization: that side is the only way, really, that their technology helps mankind. If you solve a problem, and you want that to affect people, you have to give it away or get involved.

The university opportunity is not to take it too far. But they're spending a lot of money to give licenses away that, for the most part, are not successful. Value is created by reducing investors' risk. The further you take this in a university environment, the more likely it is to get to market. And the more likely your students are going to benefit from being involved.

SmartPlanet: So, if I understand you correctly, you're saying that universities who want to spin-off successful startups should extend their reach beyond the "R" to more of the "D" in the R&D equation.

Right. The world is flat. The number of masters and advanced-level students outside the United States is surpassing those inside the United States at an ever-increasing rate. You can't stop it. These underdeveloped countries are being developed. These countries are becoming technology generators. They're not just sitting back anymore and looking at the manufacturing side.

SmartPlanet: How do you deal? Should America be forming ideas or manufacturing products? Or rather, how do you deal with international competition in innovation?

MK: You look for partnerships to co-develop. There are at least two technologies from our last trip that we're going to bring back and develop and co-run the companies, or maybe run the companies, because the major market isn't Malaysia.

In Singapore, there are huge amounts of money -- A*Star has a budget of $4 billion for research. That's huge!

We have to fight tooth-and-nail. The whole historical basis upon which the education system of the United States [is founded] is based on innovation. We need to keep our innovative edge. We need to invest in innovation. We need to keep funding this.

It is a world market. We don't own it. We have to fight for it. The investments that the U.S. has to make in technology cannot stop. Innovation is part of the fundamental being and success of the United States and the government and private industry needs to do everything it can to keep innovation here, producing small companies and jobs and creating industries that don't exist, and maybe as these things get big, they'll find their way to what used to be Hong Kong and maybe now is Vietnam, because the labor is so cheap.

Innovation from universities is the engine that creates that. Our education system is very good, but everybody else's is getting good, too. The top-recognized technology university in the world is not here -- it's in India. Better than MIT. Look at this country: why are so many Indians CEOs, in high-tech areas? Very interesting.

If you look at academics outside the United States, they're answering to their benefactors, which is typically the government. They're tasked to do a specific thing. We have great freedom in the United States, and that should continue. But unless you have an initiative -- green technology has been an initiative in the U.S., and everywhere -- these [other] countries are saying, "We want product." That's a dirty word here!

If you look at these countries, it's very focused research. These guys have a very different view of time. They're looking to build a position in an industry. A lot of times, a geopolitical position.

The most successful program that was ever run in this country was Kennedy's challenge to go to the Moon. How many technologies have fallen out of that? Materials, electronics, software -- my God, it was all-consuming, for a focused reason.

Now, with cleantech, there's no real vision that's going to spill out into a lot of other areas. Germany spends more on solar than any country in the world, and they have the least amount of sunlight. Are they creating technology? I'm sure of it. Are they ahead? No. But they're spending enormous amounts of money pushing a green technology in a green country and, in a lot of ways, the opportunity loss of their spending is enormous. Spending money on solar today is a loser. It's taking money out of the country, resources, to fund a technology because they want to be green. You can argue that they're ahead of the curve because they believe in a green planet. But we're not ready.

SmartPlanet: So you're saying that America needs a mission to unite university researchers in a common real-world goal, and that universities stand to benefit.

MK: Most universities are cheap labor. They are hired by corporations to do difficult projects, and the benefit of those is rarely truly realized by the university. Innovation has to come from universities. They have the desire, the capability, they have problem-solving. The brainpower is fabulous.

Does it help the U.S. overall? Absolutely. But you've got to look at the university model and ask yourself, is it sustainable? University research is absolutely in need of support. But help me help you -- and we have to help ourselves too, [because] we can't live our lives with our hands out to the government.

The country would benefit from another huge, impossible goal that would rejuvenate the creation of technology to address a problem and motivate a nation.

The other critical aspect of the future of the United States isn't really universities. It really goes back to primary school education. If we don't interest people to be innovators -- too look at science and technology as opportunities, and turn on our brightest minds -- you won't have anything in the future. That's what every underdeveloped country is doing. Deciding to take the youngest and brightest and putting them into the best programs. That's not socially acceptable here.

A lot of what I do is create deal flow. I bring technology together with the applications. Similarly, you've got to turn on a nation of children to thinking in a problem-solving way.

Look around. Be observant. What has to be changed? Building our deal flow is the critical part. Bringing more people into science and technology, just to keep up.

The world is changing. It's only by nurturing those bright minds and finding them and turning them on that we can stay competitive. The university is only part of it.

This post was originally published on Smartplanet.com

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