Posted tagged ‘commercialisation’

I’m dreaming of a commercial Christmas

December 26, 2011

Everyone is at it, so I suppose it shouldn’t surprise anyone to see the Pope on the bandwagon. According to news reports, Benedict hit out at the commercialization of Christmas and asked worshippers to ‘see through the superficial glitter’. Alrighty, I guess. A bit of a cliché, but then again, don’t we all want a Christmas when happy families come together and, after church and Christmas dinner, play games and talk?

Well, yes. Sort of. But the reality is that if we all did this, and stopped buying presents, having dinners and indulging in treats at this time of year the economic consequences would be serious. Of course we should try to see festivals such as this as community building opportunities, but I am inclined to think that quite a lot of what goes on around Christmas does just that: presents are an opportunity for us to try to understand and then give pleasure to people close to us, and parties bring us together. Christmas also often brings out the best in people, as support for charities and for good causes increases.

So, I think the Pope would do more good by reminding us of the ways in which we can all help to sustain each other. And as it happens, a bit of commercialization is one of them. Not least because it secures employment.

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In a spin

April 27, 2011

The journal Times Higher Education has published an interesting piece on university spin-out companies. According to research done by an organisation called Spinouts UK, over the past 10 years UK universities were able to form well over 1,000 companies, mainly in order to commercialise the institutions’ intellectual property. The top performer in the list is the University of Edinburgh, with 244 companies, followed by the University of Cambridge with 139. On the other hand many universities did not produce any spin-outs at all, and a more typical number for those that did would be in the region of 5-10. My own university, RGU in Aberdeen, was able to spin out 12.

But what should we make of this? How important is it for universities to establish companies in order to develop their IP, and how successful is this likely to be? The answer is just a little ambivalent. For a start, in my experience universities often over-estimate the benefits of spin-outs. Companies are formed as part of a commercialisation drive, but most end up doing little or no business while still running up costs and complex corporate governance. Where universities want to commercialise intellectual property, the route of licensing the IP is normally the better option. But in any case, universities should not register and commercialise IP unless they are willing to defend it. In the early stages this can be an expensive business, so some funds need to be available.

On the other hand, injecting some commercial discipline into the exercise is good, and companies can serve a useful purpose – indeed not only in commercialising IP. But it is important that proper thought goes into these decisions, with an awareness of the implications. At the end of it all, the number of companies formed is not a useful performance indicator. Income generated is, but that must be measured over a longer timeframe. Universities also need to have a good sense of what risks are worth taking (and some risks are inevitable, and need not be a deterrent), and how to arrange for good management and governance of the entities formed.

I am a strong believer in commercialisation as a university strategic aim in appropriate settings. Spin-outs can be an important component of such strategies. But setting up dozens of companies on the back of vague business plans is not a particularly good way to go, and institutions should not see this particular league table as one where they must try to hit the top numbers.

Doing the business

March 31, 2010

One question that universities and other higher education institutions may have to address in the period ahead is how they can generate the revenues that will make up for the shortfall in public funding. Clearly it is possible to reduce expenditure on education – in fact, the ultimate ‘efficiency gain’ would be to admit the student and, instantly, hand them a degree parchment and say goodbye. The cost of that would be minimal, but obviously it would not satisfy anyone’s quality expectations. So on the understanding that a student is entitled to a quality education with an acceptable ratio of students to staff, reasonable facilities, good source materials in the library, and buildings maintained to at least a minimum level, I have calculated that the current unit of resource – i.e. the sum of money paid by the government to pay for each Irish or EU student’s education – is now about €250 per student less than the actual cost of providing such an education. So if a university has, say, 7,000 undergraduate students in this category, they are losing it €1.75 million.

We could theoretically deal with this in one of three possible ways: (a) stop admitting Irish or EU undergraduate students, or at any rate reduce their numbers significantly; (b) admit the students, but adapt the programmes to the financial realities and accept there may be quality risks (larger classes, reduced materials, out of date equipment and less well maintained buildings); or (c) develop other income streams in order to subsidise undergraduate education. I shouldn’t neglect to mention the other option, which is to look again at how students are funded, and either adjust public funding levels or else introduce student contributions; none of that seems likely to happen right now.

If you take the view, as I do, that option (a) is not possible for political and indeed ethical reasons, and that option (b) should not be adopted without at least trying to do something better, it seems to me that higher education institutions must all now develop much more vibrant commercialisation strategies. This does not mean that the core activities should be commercialised – nobody is anticipating that Diageo will sponsor lectures – but rather that we need to look much more closely at how we can exploit commercial opportunities in appropriate contexts. For example, we should look at how consulting can be organised and developed as a business, or how university services could be built up as commercial businesses that also look for external customers as part of a business strategy.

The business model for higher education has, I believe, been fatally undermined. We will need to ensure that we protect our educational core activities through revenues secured on the basis of our expertise. And if we do so successfully, we may also be able to use such success to lessen the bureaucratic influence of government over our activities. In the absence of tuition fees, I see no realistic alternative.

Universities: the industry dimension

November 25, 2009

Some time ago I came across a website (I no longer recall the details) which was running what I thought was a particularly silly survey: it was asking its readers to ‘vote’ in an online poll whether universities should be more like corporations. It was silly in the sense that at that level of generality the question was completely meaningless: more like corporations in what sense? Some modern companies have adopted what we might call traditional academic values and methodologies; and I guess that understanding the ability of well-run companies to manage and maximise resources is something that wouldn’t necessarily harm us.

However, the relationship between universities and business organisations is an important issue and deserves both analysis and comment. It is important in two different ways: (i) is there anything we can learn from the corporate world? – and (ii) what kind of relationship should we have, or allow ourselves to have, with corporate partners?

For this post I shall focus on the second of these questions. I may come back to the first on another occasion, and I might just point out in passing that modern organisation theory applies an analysis to companies that could be helpful to academic institutions, whether they might want to adopt business insights or indeed avoid them. But that’s for another time.

But what about relationships with industry? Just over ten years ago the University of California at Berkeley caused some academic observers to raise their eyebrows when it announced a special relationship with the Swiss pharmaceutical company Novartis. The agreement was confined to agricultural biotechnology, and under its terms the company provided the university with $25 million of research funding, and in return it acquired rights in a share of the resulting discoveries. A number of concerns were expressed at the time, with some arguing that the deal created conflicts of interest and the possibility that academic integrity might be compromised by the industrial partner’s commercial interests. The arrangement came to an end in 2003, and was subsequently assessed by a team of outside experts. The resulting report was fairly critical. It found no ethical misconduct, but it questioned whether the arrangement had had any real impact on research output, and wondered whether the intellectual property aspects had been efficiently and fairly handled.

Whether the Berkeley/Novartis agreement was good or not so good, it is now a matter of general consensus at least amongst state agencies and government departments across the industrialised world that academic-industry links are to be welcomed. The major funding programmes of Science Foundation Ireland, for example, are based on the requirement to assemble university-industry collaborations, and in this country most of the high value research centres across more or less all of the universities have such collaborations in place. The major motivation for such relationships is that they may accelerate the commercialisation of discovery, as industry partners apply their skills in financing, developing and marketing products that are derived from the research. The risk, as some might see it, could be that the commercial imperatives applied by the industry partners may skew the research, or that the prominence given to these projects might crowd out the also necessary basic or blue skies research that should have a home in the universities.

There is little evidence to date that industry links have undermined university research, though the risks are always likely to be there to some extent and this requires strong ethics monitoring and a clear university research strategy (that goes beyond industry partnerships) to be in place. An external analysis of SFI and its funded programmes published in 2008 suggested that the industry dimension was positive and should be developed further.

It is probably also arguable that industry links should be developed, where appropriate, on the teaching side. DCU has from its establishment operated a work placement programme as part of all the university’s programmes of study that has had the effect of creating close links with the employers that take on our students, without giving our industry partners any direct influence over programme content or assessment.

Academic and intellectual integrity must always be at the heart of everything a university does; but being ‘networked’ has many benefits, not least that it allows a university to understand better what society’s needs are and how we can contribute to their resolution. Industry links are an important part of that mission.

Commercialising the academy?

July 15, 2008

Derek Bok, who was President of Harvard University between 1971 and 1991, wrote in 2003:

“Universities are approaching a critical juncture. They can try to create and enforce more effective limits on commercialization. Or they can temporize, compromise, rationalize, and continue the gradual slide into habits that could alter their character in ways detrimental to their teaching, research, and standing in the community.” (Universities in the Marketplace, 2003)

In his book, Bok bemoans the trend (which he believes began with the development of heavily resourced university sports and athletics programmes) for universities to sell things – to the point where everything in the university could be for sale ‘if the price is right’, To get an idea of what ‘commercial activities’ Bok dislikes, it is worth listing some of the ones he mentions (in no particular order): advertising to attract students; paying a salary to a football team coach which was as high as that of the President; ‘making money from intellectual work’; marketing lectures on the internet; consulting; outside corporate investment in scientific research; the sale of goods (such as mugs and t-shirts) with the university logo; universities holding stocks in companies; offering training courses to the public, including executive training; for-profit online education programmes.

The reason why Bok dislikes such activities is because he believes that the pursuit of money for its own sake compels universities to ‘make compromises with standards of behavior long considered important to a healthy process of inquiry’. Scholars should pursue knowledge and discovery for its own sake, not for its potential (and sometimes illusory) pecuniary rewards.

As the title of the book suggests, Bok does not feel comfortable with the idea of universities operating ‘in the marketplace’. But what is that? The market is where transactions take place on the back of supply and demand. Bok appears to suggest that university education should be supply-led only, because once you factor in demand you are in a market.

However, all of this needs to be placed in perspective. Bok spent most of his career in Harvard, a good deal of it as its President. Harvard charges its students a significant fee, currently in the region of $30,000 per undergraduate student (with some postgraduate courses – and more than half its students are postgraduates – considerably more expensive). In the fiscal year 2006-07 Harvard had an income from tuition fees of $656.6 million. And incidentally, the activities of the kind Bok dislikes (and many of which were practised under his Presidency) brought Harvard an additional $488 million in the same year, and the university had a total income of $3.2 billion. By contrast, the income of Trinity College Dublin (which is roughly the same age and size as Harvard) was approximately $300 million – from all sources – in the same year.

The point here is that, whatever view you take of commercial activities, universities need to have an income to fund teaching and scholarship. The resources needed for high value teaching and state-of-the-art scholarship are significant. Therefore, to meet an institution’s ambitions the search for revenues has always been a vital part of university management. At its most simplistic, this search addresses the taxpayer (though not in Harvard), in the form of lobbying and cajoling of government to hand out grants and subsidies. This in turn depends on students to justify money for teaching, and on some demand by the state for the outputs of research, where it sees this research as meeting the requirements of the common good. But even at this level the university activities are being ‘sold’, and moreover the ‘buyer’ (the state, or the government) is notorious for unpredictable and sometimes arbitrary behaviour, changing its ‘purchasing policy’ without warning and without any opportunity for negotiation. Furthermore, this is a buyer who can require policy shifts and changes from its customers, and then subsequently change these again at very short notice. The means at Derek Bok’s disposal when he was President of Harvard – to charge expensive tuition fees – are not available to Irish universities at all.

A significant impetus therefore in the development of commercialisation has been the need to diversify the sources of revenue and thereby minimise risk. Universities have therefore looked at the extent to which their activities can generate value and find customers, within the constraints of academic integrity. Broadly this has come under three headings: (a) offering university programmes to paying customers who fall outside the state’s free tuition framework; (b) developing value in the university’s intellectual property portfolio; and (c) selling services, including consulting services.

It would I think be hard to imagine how any university – even Harvard – could remain viable if they were to abstain from the deliberate pursuit of income. If Bok’s book has a value, it is that he reminds us to ensure that commercialisation has to be compatible with integrity, and must not work against the grain of academic excellence. In other words, it is good to develop a strong programme of commercialisation; but this should be based on the assumption that it can, in the short to medium term, develop real commercial value without interfering with excellence and integrity, and without compelling those who do not wish to participate to do so. A perhaps more realistic assessment of this agenda was set out by Frank Rhodes, another former university president (of Cornell University), in his book The Creation of the Future: the Role of the American University.

In the end, commercialisation should be a positive feature of the higher education landscape. Not only does it have the potential to diversify revenue, it also promotes appropriate networking between the university and the wider community of stakeholders. On the other hand, universities need to hold on to their identity as institutions that promote and defend a common good; they need to become more business-like perhaps, but they cannot altogether become businesses, or a higher education industry. Getting this balance right is one of the main tasks facing the sector.