1.1 What Keeps You up at Night?
One sunny afternoon, before catching a flight to Cologne, I sat in my office chair in Barcelona and started a Skype conversation with an executive 5,860 km away. He was on the leadership team of the Deshpande research center at the renowned Massachusetts Institute of Technology (MIT) in Cambridge.
After a few words, I asked him a tough question: what keeps you up at night? In other words: what is your biggest challenge in leading your research center at MIT? The answer was expected: to achieve a research center that is financially sustainable.
This was the most common answer given by leaders of research centers 1 when asked to identify their top challenge, according to interviews with 61 leadersâmanaging directors or those in other leadership roles 2 âat 35 international research centers, 3 as well as on-site observation at 28 of those organizations.
No single issue today is higher on the agenda of research centersâ senior management than solving this question, whether a center operates in engineering, pharmaceuticals or electronics, or is even a business school [1].
1.2 The Paradox: Quality and Sustainability
Over the past 30 years, the biotechnology industry has attracted more than $300 billion in capital. Much of this investment has been based on the belief that biotech could transform health care through emerging spin-offs from research centers.
These emerging firms were believed to not suffer from the bottlenecks of established pharmaceutical giants, to break down the wall between research-oriented and innovation -oriented centers, and to produce a pool of new drugs. It was assumed that these medicines would create value for society and profits for their investors.
Nevertheless, the promise remains just that. Despite the commercial success of research organizations such as Genentech, which became a subsidiary of Roche, and the revenue growth of the industry, most biotechnology organizations make no profit [2].
So is it possible to make research economically sustainable? There is an implicit paradox, with two priorities that are essential and seem to pull in opposite directions: research quality and economic sustainability.
On the one hand, research centersâ academic directors prioritize performance metrics based on academic orientation, focusing on preserving the quality of the research produced and often investing expensive resources. On the other hand, research centersâ executive directors prioritize performance metrics based on economic orientation, focusing on ensuring economic sustainability and capturing revenues deriving from discoveries. Is there any way to reconcile and align these opposing perspectives?
Experts follow two streams of thought regarding this paradox. The first stream prioritizes academic metrics, perceiving a tension between âthe need for industry funding for academic research and the need to preserve academic freedomâ [3] or believing that âworking with industry can restrict communication among scientistsâ for publishing [4]. This tension sometimes results in low levels of revenues to sustain the center economically (e.g., by having a reduced number of industry collaborations) .
Examples of this first group include those centers that were created by the United Statesâ National Science Foundation years ago and that have disappeared. After 11 years of public funding, the engineering research centers were expected to become self-sustaining. Many of them were dissolved after completing their federal funding cycle because they did not become economically sustainable [5].
The second stream of thought prioritizes economic metrics, assuming that researchers with industrial support are âat least as productive academically as those without such support and are more productive commercially [6].â This assumption sometimes helps people keep in mind the importance of capturing economic value from discoveries (e.g., generating a large number of industry collaborations) , but the quality of the research may decline.
Some examples of this second group are the 159 research centers in 33 different countries that recently disappeared from rankings. Some 70% of the vanished centers emphasized economic over academic metrics. In consequence, these centers either decreased the research quality or limited the creation of knowledge assets, 4 creating an unsustainable cycle of value appropriation. These centers were 14% at the university, 41% in industry, and 45% in government. 5
Moreover, between the two groups described, there is not only an opposition of thought but also a funding gap. If one looks at the total product development cycle, it seems that the early research stage is typically done in university and government research centers. The later implementation and commercialization part is typically done in industry. However, there is a gap in the middle, which very few organizations address. Therefore, this opposition of thought produces not only a knowledge gap but also a funding gap, which greatly slows down the product development cycle until a âvalley of death [7â9].â
Furthermore, external factors make it more difficult to raise public and private funding. On the one hand, local governments are looking for cost savings in the area of research and plan to reduce public funding contributions, while international institutions are changing the rules of funding participation, such as the European Unionâs Horizon 2,020 program. This program is moving from the principle of full-cost funding to the introduction of lump-sum payments to cover general administrative expenses, 6 which may lead to a deterioration in the funding ratio for EU-sponsored projects [7]. On the other hand, corporations have not yet recovered precrisis levels of expenditure on research and development in many countries, such as Finland, Japan, and the United States [10].
As a consequence, many research institutions have applied continuous restructuring, oscillations between research and innovation orientations, centralized to decentralized models and an endless reengineering of processes, with few results [11].
The failure of those organizations is not due to a lack of effort or commitment by management but to the continuing assumption that research centers should choose between academic rigor and economic profitability, with no overlap.
In the midst of this dilemma, research center managing directors hold on, trying to deal with both mind-sets. This complex environment creates benefits and challenges for these managing directors, a role with satisfying and challenging aspects (See Table 1.1).
Table 1.1
Most satisfying and difficult aspects of being a research center managing director
Most satisfying | Most difficult |
|---|---|
Intellectual stimulation of working in a cutting-edge innovation environment Maintaining relationships and collaborating with the university, industry and government Impact... |