The University of Virginia’s provost, Tom Katsouleas, once told me that less than one percent, by his estimates, of basic research is commercialized and that there may be as few as one near-term commercialization for every $10 million invested in fundamental research. This is an awful waste, especially when America is undergoing a reinvention in which entire industries are being wiped out and new ones are being created.
A broad range of technologies is now advancing at exponential rates and converging, impacting entire industries. When computing, telecommunications, and consumer electronics converge, for example, we get smartphones, smart TVs, and augmented-reality systems. Computing, medicine, and sensors join to produce wearable medical devices such as the Apple Watch — which will transform health care—and Apple Research Kit, which will revolutionalize clinical trials. Uber has already disrupted the transportation industry with its GPS-based cellphone apps; Netflix has made mail-order DVD rentals obsolete with its use of storage and networks; and WhatsApp has decimated the SMS revenues of telecom providers with its mobile-data technologies.
Corporate executives have no idea what to do to survive this tsunami of technology convergence; even the innovation models that they were trained on, such as Clayton Christensen’s The Innovator’s Dilemma, have become defunct. The competition no longer comes from within an industry; it comes from elsewhere, and not having domain experts in fields such as synthetic biology, nanotechnology and robotics, most companies have no idea how to respond to these new threats.
Universities, though, do have the experts. As a result of decades of government investment in basic research — in fields such as computing, medicine, sensors, artificial intelligence, digital manufacturing, robotics, nanomaterials, and synthetic biology — they have an abundance of talent and intellectual property. This is a goldmine for industry. Businesses that are under siege or are trying to expand into new markets usually look to buy start-ups or form partnerships with research universities. And some simply take what they need. What better place is there to acquire intellectual property and talent than the universities, after all?
Uber wanted to urgently build self-driving cars, so it lured away more than 40 researchers from Carnegie Mellon University in January this year. Being nice or ethical didn’t matter to Uber; it took what it wanted and then came back to the university with a relatively small consolation prize: $5.5M for a robotics faculty chair and three fellowships. Apple was also found guilty of incorporating unlicensed microchip technology from University of Wisconsin–Madison into its iPhones and iPads—and was ordered to pay more than $234 million in damages. We will see much more of this in the next few years. If universities don’t cooperate, businesses will take whatever they can get — because they are desperate. In order to keep its researchers, academia will need to put aside its historical aversion to working with industry.
Universities are better off forming industry partnerships to jointly develop technology, as Stanford and M.I.T. did in accepting $50 million from Toyota for research in A.I. and autonomous-driving technology. Several months after being raided by Uber, Carnegie Mellon University also agreed to partner with Google to turn its campus into a living laboratory for Internet-connected sensors and gadgets. Companies such as Toyota have been blindsided by technologies emerging from other industries; visionaries such as Google have realized that they can’t do everything on their own. So this is a win–win strategy.
A huge opportunity exists to teach businesses about emerging technologies and have them fund research-commercialization efforts — if universities seriously rethink their traditional ideals of academic freedom and the sanctity of the industry–academia division. Such partnerships can make up for the declining government funding of academic research. And it doesn’t have to be a Faustian bargain. Both partners can benefit if the partnerships are structured in a meaningful way, as the partnership between Google and Carnegie Mellon is. After all, Google didn’t hire away university researchers; it funded research and testing on campus.
Stanford University figured this out long ago. (Disclosure: I am a fellow at Stanford’s Rock Center for Corporate Governance.) Its faculty members are encouraged to work closely with industry, and these collaborations have led to innovation on a grand scale in Silicon Valley, with the formation of companies such as Google, Hewlett–Packard, and Cisco Systems. This, in turn, has led to an endowment of more than $20 billion through the donations that its billionaire alumni have given to it.