A Guide for Research Laboratories: How To Create and Launch Breakthrough Technology Ventures: Part I
The Strategy, The Structure, and The Teams
This is Part I of a series of posts on how research laboratories and universities might create and launch breakthrough technology ventures. Of course, many parts of these posts are also relevant to anyone founding a venture. It is based on my experience at SRI (Stanford Research Institute) as President of SRI Ventures, where I was responsible for developing and executing our venture creation strategy.
At SRI, we developed and refined this strategy over more than 20 years and created and launched over 70 ventures with a current cumulative market value of over $100B in diverse areas such as robotics, AI, biotech, microprocessors, and more. Our successes included companies like Intuitive Surgical, Nuance, Orchid Biocomputer and Siri.
Our approach wasn't just about launching ventures; it was also about leveraging our intellectual property to create value. Even when a venture didn't materialize, we often turned to technology licensing, thereby generating substantial royalty income for SRI.
These are the fundamental elements that we needed to build in order to make a breakthrough technology venture:
The venture will be on a mission to solve an unmet need that is screaming to be solved in a large, rapidly growing market.
The venture will have a CEO and an innovation team exquisitely suited to solving the market problem, answering the question, " Why are we the right team?”
The venture will have a differentiated disruptive, not incremental, technology solution - a breakthrough product or service to address the market opportunity. The solution will be a “painkiller,” not a “vitamin,” for the customer.
The team will have identified a clear and compelling answer to “why now?”
The team will have identified key competitive barriers.
The venture will have ownership of core intellectual property.
The team will have developed the elevator pitch, the value proposition, the venture deck, and the business plan. They will have an in-depth knowledge of the market, the customers, the competitors, the products, and the business models.
The venture will have an effective positioning strategy for introducing the product or service into the marketplace.
The team will have identified the key elements of risk and their mitigation.
The team will have developed a compelling demo that brings to life the venture solution and allows for a deeper understanding of the power of the idea and the risks that are mitigated.
The venture will have great investors and outstanding board members.
The Ventures Group
As you can see, these are daunting tasks to complete, and at SRI we needed a way to begin. To focus on this task, the CEO at that time, Curt Carlson, created the Ventures Group, which was responsible for creating and launching breakthrough ventures as well as generating royalty income. I was recruited to lead the Group and develop and execute the strategy. In a later post, I’ll describe the Ventures Group's structure, staffing, and financials.
How did we start the process of conceiving breakthrough technology ventures? First, we needed help from all of SRI’s teams. Ideas for ventures might come, for example, from researchers studying new drug compounds, AI innovations, robotics capabilities, materials, and more. But technology ideas alone don’t create ventures, as you can see from the eleven elements above.
NABC
Curt was passionate about explaining the basic elements of innovation and venture creation to all the staff at SRI. He summarized them into the form of NABC, where N stands for the important unmet end-user or customer and market need; A stands for the Approach to address the customer’s needs; B stands for Benefits per cost; and C stands for Competition and other alternatives.
I often laugh about the fact that you couldn’t find an employee at SRI that didn’t know NABC. Once I was talking to the guard at the front desk, and she and I practiced her NABC for a hair salon she was going to start.
So, over time, the Ventures Group would have many ideas to consider from inside SRI as well as from entrepreneurs who came to us from outside bringing their own venture concepts. The ideas were diverse— relating to many markets and many technology disciplines.
The Strategy for Creating Breakthrough Technology Ventures:
One effective approach for creating breakthrough technology ventures was to regularly bring together technology leaders, entrepreneurial staff, and experienced advisors to brainstorm venture concepts with my team. To begin the process of creating breakthrough technology ventures, we had two possible choices of how to start:
Identify a venture concept for an “unmet need, screaming to be solved, in a large and rapidly growing market.” Given the venture concept, we would attempt to identify a breakthrough technology enabler within SRI for the venture concept.
Identify a breakthrough technology that we developed in our laboratories, and, given the technology concept, attempt to create a venture concept for the “unmet need, screaming to be solved, in a large and growing market.”
Both choices have the potential for building a breakthrough venture, as long as both the venture concept and the technology breakthrough are ultimately identified. Most ventures started with choice (2) because building breakthrough technology was our fundamental mission.
We would then choose a subset of these concepts that seemed to hold promise and meet our demanding criteria. For these few concepts, we would identify lead individuals who were passionate about the concept and experienced in creating ventures. We called these lead individuals “venture champions.” They were usually not people expected to be CEOs—that choice would come later—but they were, for sure, champions of the venture idea.
The Vanguard Teams
The venture champions had the responsibility to organize small interdisciplinary groups both within and outside the laboratory. Their groups were composed of enthusiastic and passionate entrepreneurs, scientists, and strategic advisors who worked together to conceive of an initial breakthrough technology venture concept that might solve the eleven elements above. This effort might take many weeks, months, or never. We called these small teams “Vanguard Teams.” We chose that name because we wanted whatever venture we created to be on the vanguard of a market revolution.
The Vanguard Team could be made up of potential future members of the venture, as well as many team members who might not join. For example, several of the scientists might only want to focus on their research and not join a venture. But these same scientists would almost certainly want to see their work become part of a venture and were happy to join the Vanguard Team. Other team members were advisors. Others were experienced entrepreneurs from outside the research lab. Others were entrepreneurs from within or from outside SRI that had a venture concept. Others were “retired” VCs who were happy to help us. Almost everyone was motivated to participate in a Vanguard Team because they would be recognized both financially and intellectually for their role in creating the venture.
The Venture Champions
Here’s a tongue-in-cheek description of the role of venture champions that I wrote many years ago, called the “Miranda rights for Venture Champions.”
A Venture Champion is the leader of a venture team. Venture Champions act as if they are the venture's CEOs but know that they are likely to be replaced by a future CEO.
Miranda rights for Venture Champions
1. You have no right to remain silent
2. You will take full responsibility
3. Anything you say can and will be used against you by your competitors
4. You will pick an important business opportunity
5. You will team productively with others
6. You will build a value proposition and venture deck
7. You will iterate often with everyone, inviting - even seeking out - constant criticism and suggestions
8. You will meet regularly to present and refine your presentation
9. You will never be satisfied with your value proposition
10. You will persevere
11. You will be positive and optimistic at all times
12. You will succeed
In my next post, I'll provide more detail on the Ventures Group and the Vanguard Teams.
Your Venture Coach,
Norman
Very interesting article, Norman. I love the focus on painkillers vs vitamins, and the emphasis on the value of IP. Lots of startups settle for being a vitamin, often built on someone else's technology.
Great article--we find that few companies are this fundamental about what must be done for systematic success.