Editor’s note: The RTP Product Pipeline is a new feature for WRAL Local Tech Wire. Its purpose is to help entrepreneurs, business leaders, educators and inventors better understand the product commercialization process. Montie Roland and Thomas Vass are co-founders of The RTP Product Development Guild, Inc. Their column appears weekly.
MORRISVILLE – One of the reasons that we formed the RTP Product Development Guild, Inc., was a sense of foreboding that the rate of new product development and new venture creation in the RTP was inadequate.
Our understanding of the future economic success in this region, and the nation at large, is that technology based economic development is the only sure path to self-sustaining, and self-renewing wealth for the maximum number of citizens. The process of innovation and the success rate of commercialization is very uncertain, so it takes a huge number of deals at the top of the RTP product development funnel to create the foundation of regional economic success. Very few of the deals ever make to the end of the funnel.
But, we also know that tech-based economic development is much slower to create jobs and wealth than the BIG PR JOBS POP that comes with recruiting a Dell or a Google. Those type of jobs created from industrial recruitment and tax incentives are not sustainable over time, as the case of the imploding textile and tobacco jobs in North Carolina have demonstrated. Just like textiles and tobacco, Dell and Google will be short-term fixes in a long-term struggle for economic prosperity.
We were confronted with a dilemma about how to stimulate new product development and technological innovation in the RTP. Given the big political advantage of the status quo economic development strategy in North Carolina, how could we create an innovation environment in the RTP that featured new product development as the economic growth engine?
We decided to follow Alexander Hamilton’s advice when he had a similar problem at the beginning of the nation’s history. In his case, he had to figure out how to tie the allegiance of bankers and bond buyers to the political fate of the new country.
He created a national bank, and centralized financial power in the bank so that he could distribute financial benefits to the widest number of bankers, all of whom would then reciprocate with their political allegiance to the new nation. It was a type of Play-to-Pay system, rather than our current political system of Pay-to-Play.
In our case, we decided to create an environment where the maximum number of people profit from the RTP technological innovation process. Our idea is to create maximum wealth and then distribute it as widely as possible so that many people will owe their financial allegiance to the new economic strategy.
The metaphor for our new model is the existing network of actors who benefit from the current technological process. It is such a small network that it is easy to identify all the players. Our idea is to expand the numbers of financial beneficiaries by opening up the process of new product development.
The most obvious players who benefit from the existing system are the sources of capital who sit in a favored cat-bird seat to pick and choose what deals they will fund. They like to tell themselves that all good deals get done, but we are skeptical. We suspect that all that gets done are the very small number deals that pay out a huge profit in the shortest period of time.
So, our first idea is to create multiple new sources of capital to fund the growth of high technology product development. By increasing the supply of capital, the competitive target rate of profit should come down, more deals will get done, and many more people will benefit from the increased flow of profits. In order to become a great innovative region, we will need a much greater supply of private capital.
Second, we have noticed that a disproportionate amount of resources and attention in our region is paid to the technology transfer programs at the local universities. We think our universities are great but we think that there are more opportunities to commercialize the ideas of independent entrepreneurs who are not affiliated with the university network.
Our second idea is to create a social-business network that functions like the university network to help entrepreneurs through the fuzzy front end of product development. Our strategy here has a two-part success ratio. First, by using independent private consultants to deliver the advice, we collectivize the risk of new product development and drop the cost to the entrepreneur. The private consultants, much like Hamilton’s bankers, become tied to the financial success of the new product development process. Second, our model allows many more entrepreneurs to get the help they need for successful product launch.
Third, we could not help but notice the big influence that a small number of law firms play in the RTP new venture creation process. The small number of law firms are closely aligned with the university tech transfer programs, who are also closely affiliated with the single local big MOMA non-profit that acts as a gate-keeper.
Our idea is that both governments and non-profits should play a supportive role in creating a sympathetic environment for private sector businesses to make profits. Somehow, our government agencies and non-profits have gotten the notion that they are the primary service delivery agents. Their function currently acts to limit diversity of thought and the maximum transfer of knowledge that are required for maximum rates of new venture creation.
We are going to entice many small law firms and small engineering firms into the new network of product development so that they can benefit financially from the process. By creating new business networking events, we think that lawyers, CPAs and financial consultants will provide the necessary “boundary-crossing’ function that honey bees perform when they pollinate flowers.
It will take lots of honey bees to create and transfer new product knowledge in the RTP, and the honey bees will not perform this valuable social function if they can not profit from the activity.
We have been thinking about conducting a seminar in November to teach people how to profit from the new product development process in the RTP. Many people in the RTP know that new venture creation goes on, but do not know how to take financial advantage of the current setup. We think we have some good ideas for them based on our understanding of who profits today, and we think we can meet one of our civic duties if we teach them how to make money on the deals.
If you are interested in our seminar, please visit our Web site and tell us about your interest.