Bringing Ideas to Market

How a handful of U.S. business schools are helping the National Science Foundation commercialize innovation.
Bringing Ideas to Market

Academics, business experts, and government leaders all agree that innovation is the key to economic growth, but getting innovative ideas out of the laboratory and into the marketplace can be even more difficult than developing the ideas in the first place.

In the U.S., the National Science Foundation (NSF) annually spends about US$7 billion to fund research in science and engineering—but that investment hasn’t always led to the commercialization of new technology. To improve the success rate, in 2012 NSF began developing a network of universities that would teach business skills to teams that had won grant money from the agency. The Innovation Corps (I-Corps) began with two nodes, one at Georgia Tech and one at the University of Michigan.

Early in 2013, the program expanded with three more nodes, each of which received roughly $3.7 million in funding. The Bay Area Regional I-Node program is a collaboration among the University of California Berkeley, UC San Francisco, and Stanford University; a node in the Washington, D.C., area includes the University of Maryland, George Washington University, and Virginia Tech; and a node in New York City features City University of New York, New York University, and Columbia University. NSF’s goal is to create a closely linked network of universities that share ideas, training techniques, and best practices on how to commercialize ideas.

It’s not an easy target. “I heard someone from NSF say, ‘The scientists we fund are very good at converting money into ideas. We need to get better at converting ideas into money,’” observes Rich Lyons, dean of UC Berkeley’s Haas School of Business.

Still, results over the first two years have been promising as I-Corps has adopted a system wide approach known as “evidence-based entrepreneurship.” While the I-Corps story involves many parts and many players, one way to take a closer look at it is to see how it’s unfolding at Haas.

Training the Teams

The Haas School already had a commercialization program in place before it applied to be part of I-Corps, Lyons notes. At the same time, he and other school leaders had been considering how Haas could help the university get science to market more effectively. He says, “We knew we had a good geographic position for building an I-Corps node in Silicon Valley. We also had a lot of connective tissue already with Stanford and UCSF, so it wasn’t hard to construct those relationships into the Bay Area I-Node.”

During the 2013–2014 academic year, that node will train 48 teams of NSF grant winners, half this fall and half next spring. The three-person teams consist of the principal investigator, typically a tenured professor whose research has produced the new technology; the entrepreneurial lead, often a post-doctoral grad student with relevant technical knowledge; and a mentor, someone with business or entrepreneurial experience. NSF chooses the teams and also determines where and when they will take their seven-week I-Corps training. Those who attend the sessions at Berkeley will take a three-day workshop on campus, then spend five weeks staying in touch virtually. They return to campus for three days to finish the program. 

The Bay Area node is also conducting similar programming for regional entrepreneurs who don’t have NSF grants but who have created new inventions they’d like to commercialize. “To find participants for those programs, we’ve sent announcements to California schools and national labs,” says André Marquis, executive director of Haas’ Lester Center for Entrepreneurship & Innovation. “They don’t need to have NSF or university affiliations—they just have to be teams balanced between people from tech and business backgrounds and have business ideas that are scalable.”

One of these additional sessions will take place at Berkeley; the other, which will focus specifically on healthcare, will be held at UCSF. “Business models in healthcare and hospitals are special,” Marquis notes. “It’s an experiment to see if we can add value by creating a special version for healthcare—we’re planning one for clean energy as well.”

Regardless of who’s taking the program, the curriculum remains similar, he says. “We teach scientists what a business model is and get them to a go/no-go decision. It’s an educational program to teach basic startup triage.”

Staying Lean and Focused

The key component of the I-Corps curriculum is the Lean LaunchPad system created by serial entrepreneur Steve Blank, who has spent his retirement years writing books about the entrepreneur’s journey and teaching at schools that include Stanford and UC Berkeley.

“Entrepreneurship educators usually treat startups as nothing more than smaller versions of large companies,” says Blank. “They teach entrepreneurs how to write business plans, how to hire VPs of sales and marketing, how to do five-year forecasts, how to conduct market research. That makes sense for a large company, which knows who its customers are, who its competitors are, and what its pricing structure should be, because it’s most often launching a next-generation or adjacent-market product.

“But startups begin with a series of unknowns,” he continues. “Entrepreneurs need to search for their business models, not search for their business plans. Successful ones tend to change their plans before they run out of money, because no business plan survives first contact with customers. This means the educational content of an entrepreneurship class needs to be different.”

Blank’s Lean LaunchPad system has three parts: customer development, agile engineering, and business model design. The benign-sounding “customer development” is the one that’s hardest for most participants: To develop an idea of what customers might want in a product, a team must get out of the building and speak to potential users, asking what features they need, what channels they use to purchase products, and how much they’re willing to pay.

“Especially for people who spend a lot of time in the lab, it’s frightening to go out and talk to customers,” says Marquis. “And it’s shocking to have people say your baby is ugly. The most common answer to ‘I have this new nano material’ is ‘Who cares?’” While participants might be stunned to hear such blunt responses, Marquis says, “I think it’s fabulous. It gives us a teaching moment. Our job isn’t to tell participants the answers—our job is to coach them so they can listen and learn on their own.”

Each team is required to inter-view 100 customers before the class is finished—and through these interviews, says Blank, the teams continually ref ne their offerings. “They use this information to build their products iteratively and incrementally, a piece at a time,” says Blank. “These are called ‘minimum viable products,’ or MVPs. Instead of showing customers a whole mobile app, they might show a wire frame. Instead of designing a whole engine, they might create a diagram of a cylinder. This is known as agile engineering.”

To keep track of how well they’re designing products and delivering value to customers, teams must create a business model canvas, a term defined by Alexander Osterwalder in the book Business Model Generation. “Osterwalder believes any business can be described by nine components,” says Blank. “What are you building, who are you building it for, what’s the distribution channel, how do you create demand, how do you make money, do you need any partners, do you need special resources, do you need special activities, and what are the costs? You can diagram this canvas in one slide. So we make students write their hypotheses in yellow sticky notes.”

Early in the course, students must stand in front of the class to present their canvases, while the teaching team sits in the back and offers critiques. “By reacting to what they present, we convey lessons in every class,” says Blank. “We do teach theory, but only after students have experiences.” It’s all part of teaching students to adapt and perfect their ideas until they have a winning invention that customers will pay to use—and investors will pay to commercialize.

Expanding into I-Corps

Blank began teaching a customer development class at Haas in 2003, but it was several years before he put all three pieces of the Lean LaunchPad course together. The first time he presented it in its entirety was for a class he taught in 2011 at Stanford’s Technology Ventures Program through the school of engineering. He thought it was such an interesting experiment that he blogged it live so other educators could watch its progress.

“What I didn’t know was that personnel at NSF were reading each installment,” he says. That’s because administrators at NSF were looking for better ways of helping their funded scientists turn into prof table entrepreneurs, and they thought Lean LaunchPad might be the answer. 

“NSF-funded entrepreneurs weren’t failing because they weren’t great scientists with brilliant inventions,” says Blank. “They were failing because they couldn’t bridge that ditch of death in commercialization between getting the funding and translating the science into a company.”

The Lean LaunchPad’s systematic method of testing hypotheses before moving forward had an intrinsic appeal to scientists who had spent their whole careers doing just that. “We’re teaching them evidence-based entrepreneurship,” says Blank. 

Blank taught the first NSF class at Stanford in 2011, with impressive results. “From day one, NSF insisted we do incoming and outgoing metrics on what the participants learned,” says Blank. Because only some NSF teams were taking the first Lean LaunchPad course, the control groups were the teams that were just receiving traditional training. It turned out that teams that didn’t take the class received outside funding at a rate of 18 percent. Those that did were funded at a rate of 60 percent.

“If the class had been a failure, there would have been no difference in the numbers,” says Blank. “But given these numbers, we can say that evidence-based entrepreneurship dramatically affects how we educate our entrepreneurs.”

As NSF developed and expanded I-Corps, officials decided to make Lean LaunchPad an intrinsic part of the curriculum at all the nodes. To that end, Blank has created a two-and-a-half-day Lean LaunchPad Educators course to provide training for the faculty who will deliver it. In fact, his syllabus and slides are available for free online, and he has recorded all his Lean LaunchPad lectures as a MOOC so that any other university in the world can use them as well. That’s because he’s absolutely convinced that entrepreneurship is important for the health of the economy—and he knows commercialization is critical to entrepreneurship.

“For the past 75 years, the U.S. has spent billions of dollars to fund science and engineering research as a federal policy,” Blank says. “Yet, the commercialization of science is left to private capital—and venture capitalists generally follow fad-based investing. That giant sucking sound you hear is all the venture capital money going into social media, because the investors want quick returns. They don’t want to wait ten years to make money on scientific investments.

“So the real question is not ‘Should the government be investing in startups?’ but ‘How can science-based startups be made more attractive to investors?’” he continues. “And the answer is, we need to reduce the risks of those commercialization opportunities. For that reason, I think the Lean LaunchPad class is important to the country.”

Reaping the Benefits

I-Corps isn’t just good for the country. It’s good for the participating schools as well—at least, that’s the case at Berkeley, where Lyons sees three distinct benefits to his school’s involvement in the program. 

“We’re taking what we’ve learned as an NSF I-Node and applying it to a pre-existing entrepreneurship program, which has made that program stronger. So one benefit is the spillover into other programs on campus,” says Lyons. A second benefit is the knowledge that Haas faculty gain as they help deliver the program, and a third is the wealth of opportunities that crop up for students.

“We might have grad students who are actually working on the kind of technology the teams are developing,” says Lyons. “We can introduce the two groups and it might be productive. We also want to make sure we stay in touch with NSF teams and create networks that our graduates can use in the future.”

Schools that aren’t part of I-Corps can still benefit from Lean LaunchPad protocols. Educators can access the whole system online, then take what they need to put together proposals, discuss possible funding opportunities with donors, and build similar programs on their own campuses, says Lyons. 

But whether schools adopt Lean LaunchPad or develop their own courses, there seems to be a definite boom in entrepreneurship programs across the business school landscape. “I think the driving force is students,” Lyons speculates. “More of them are coming to campus and saying, ‘At some point I want to found a company or be part of a startup.’ My hunch is that this attitude is coming from wholesale shifts in the labor market. Increasingly, young people are thinking of them-selves as independent contractors who ‘sell’ their labor services on a project-by-project basis, and they aren’t linked to any one firm over time. We are all our own entrepreneurs going forward.”

Another reason behind the growth in entrepreneurship, suggests Marquis, is the fact that launching a startup is simply more possible now, largely because of the Internet. “You can gather resources from around the globe for your startup,” he says. “You can collaborate with people—you can build websites that allow you to sample. You can find funding through Kickstarter and people through LinkedIn. You can crunch data through resources like Amazon, without having to invest in all the hardware.”

The fact that business schools are partially powering the entrepreneurship boom means universities are providing even more value to their communities. Lyons loves to be able to tell stakeholders how Haas programs are jump-starting economic growth. He says, “What’s my favorite story to tell donors right now? The NSF I-Corps story! We’re grabbing intellectual product from around the country and helping inventors bring it to the market. Who doesn’t like that story?”

Adds Marquis, “Especially because we’re a public university, benefiting society is part of our core mission. Entrepreneurship programs allow us to get that benefit out into society, and that’s why we have such a passion for them.”

Successful entrepreneurs have always managed to combine invention with commercialization. Programs like I-Corps combine the strengths of government resources, school knowledge, and entrepreneurs’ own know how to take innovations from great ideas to great products. In the process, everybody wins.