This is the 3rd of my blogs on the Witty Report, and I want to visit the complex issue of where and how precisely does healthtech innovation happen, and are SMEs really more important than large multinationals? OK, to be this is not exactly what Sir Andrew says, but he does emphasise the role of SMEs in innovation, and says relatively little about large companies and whether or not universities should continue to focus their attention on multinationals.
I agree with the Witty Report that compelling evidence suggests that innovation now takes place mainly in SMEs. I have experience
of collaborating with innovative SMEs, and I have witnessed at first-hand how academic support can be
instrumental in growth and job creation. While I am therefore a convert to argument that
significant benefits will come from improving opportunities for SMEs and
universities to work together, it is probably the case that not all academic
staff share this view. The reasons are complex, but one contributory factor is the
relative small scale (and perhaps a lack of kudos) associated with working in partnership with a very
small SME compared to a global multinational. Much thought needs to be given to communicating the value of
working with SMEs, and the development of incentives and instruments to drive
this collaboration. Indeed, the Witty Report makes a number of recommendations that - if implemented - could change the collaboration landscape in the UK and make a real difference to our economy.
But is it only SMEs that are important in health technology and medical devices innovation? Obviously not, and again especially in these sectors. Large multinationals (and
indeed the largest SMEs) are still very important drivers of innovation, but this is increasingly because of their role in maximising the impact of de-risked innovative technologies developed by SMEs, and by providing greater opportunities for
economic growth on the basis of their exploitation. Larger companies have the maturity, expertise, and
infrastructure (including specialist knowledge of regulatory affairs, market
needs, reimbursement, marketing, and distribution networks) necessary to
respond quickly to opportunities created by SMEs. The supply
chains in health technology and medical devices are sophisticated,
and the expertise embedded in UK-based multinationals is a critical determinant
of our ability to exploit innovation, generating prosperity as
well as providing more general socio-economic benefits. Perhaps even more importantly, large companies are
frequently “cash rich” and/or have access to sizeable capital that is necessary
to scale up innovation, even those innovations that have already been
de-risked by SMEs.
I will now be taking a short break from blogging, and hopefully people will have time then to digest and comment on my thoughts stimulated by Sir Andrew Witty's Report. More in the week beginning 4th November. Don't forget you can read the Witty Report for free: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/249720/bis-13-1241-encouraging-a-british-invention-revolution-andrew-witty-review-R1.pdf
Indeed, large multinationals are also able to invest in technology which is at a much earlier stage in the commercialisation process, but don't always choose to, and this is sometimes a question of company ethos.
ReplyDeletea) does the company want to be ahead of its competitors, doing something that no-one else even knows about, which may lead to a new product in 20 years' time?
b)does the copany want to keep a beady eye on SMEs to acquire the newest and best innovations with much of the risk removed?
Can they strike a balance? Can SMEs continue to be innovative without getting jaded if they're never going to get things to market before they're acquired by someone bigger? Perhaps that will be the only way to get things to market in the future, and universities have something to learn from this? What do you think?
Thank you Ana, my first blog comment! I take your point that large companies do not always invest many resources in technologies that are perceived to be far from commercialisation, although my observations are that company "ethos" matters far less than business strategy and hard-nosed analysis of the potential commercial impact of the new technology (and the costs of reaching market). Ethos often mattered more in companies that were family owned and/or led by strong personalities - I have seen many smaller companies make bold decisions that were closer to adventure than commercial sense. Modern global healthcare multinationals are highly focussed on return-on-investment and return for shareholders, and therefore in answer to (a) I think the answer is "yes" as long as the business analysis concludes that this will be of great commercial benefit. OK, in modern business, 20 years is beyond most commercial analyses, but companies still invest in technologies that they perceive to be of great strategic importance (for example, Medtronic - arguably the worlds largest medical device company - formed a joint venture with Genzyme back in 2004 to avoid the risk of "doing a Kodak" i.e. to ensure that they had access to IP and new regenerative technologies that were unlikely to reach the market in the short term, but these were new technologies that could potentially render almost all of Medtronic's products obsolete when they reached the market. In answer to (b), large companies certainly watch smaller companies, again I can think of many examples where this led to acquisitions. Surprisingly though, despite the expertise and professional diligence of large companies, I think they still sometimes make relatively poor commercial decisions such as missing opportunities or paying too much for de-risked technology held by SMEs. Finally, in my experience most SMEs never become jaded by the dreams of being bought by a large company. For many entrepreneurs and their investors this is precisely the exit strategy they planned, and entrepreneurs never tire of starting new companies once they successfully sell their first businesses. If we want to escape recession and create more private sector jobs (and we are told that Sheffield needs 60,000 to 70,000 new private sector jobs), then what we need more than anything are more bright and motivated entrepreneurs, working with and being supported by Sheffield's universities and our partners in the NHS, and resourced with new sources of government funding that include tax incentives. I think this is pretty much what the Witty Report says.
ReplyDeleteYes, I think you're probably right, and I hope that the support for SMEs continues. Certainly the UK's system for setting up companies is envied in other parts of Europe. A friend recently bemoaned the fact that in her country, she would need to provide proof that she was an expert in her chosen area before she was able to register a company to trade - not a great incentive for enthusiastic young entrepreneurs with motivation but without much business experience...
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