Man in the Gray Flannel Suit

The biggest hole in all of World Class R&D is commercial input to R&D. This is not a gap that can be filled by Executive MBA programs (though they can help). It’s a gap in real world experience. It never ceases to amaze most business professionals, especially those in the Venture Capital industry, how researchers can be so brilliant in their profession, and yet so ignorant in the basics of business.

World Class R&D is all about finding those individuals who will grow into being excellent Business Managers, but this will happen only after a wash-in period of years. We make it possible for merely good leaders to become great leaders. This is an overall outcome from World Class R&D, but in the meantime we must deal with this gap during pre-game+. The answer, I’m afraid, is not very clever. We hire them.

As part of an exploratory team, I tested the reception in the pharmaceutical industry for a concept called Heritage Products. We would have large pharmaceutical firms use their older commercial products that they were no longer commercially promoting as a means to fund acquisitions. We exchange these products with startup companies in exchange for rights to their technologies or early products. The startups receive a product that generates, say, $10 million per year in cash, and could potentially increase to $15 million per year with the right amount and kinds of promotion. The startup gets its funding; the firm secures rights to the startup’s technologies. The response I received:

We don’t want our researchers distracted with commercial concerns. Pharmaceutical Industry Client (2007). Personal Communication

This one quote best summarizes the challenge of commercial in R&D.

Instead, in World Class R&D we do want researchers distracted by commercial concerns in all that they do. They need to understand the needs of the payors, the distributors, the salesforce, and indeed anyone who can influence the public perception of our products. In the pharmaceutical industry they need to understand the Quants, their formulas, and their inexorable march toward Evidence-Based Medicine. By having to periodically launch and promote sub-blockbuster+ products our researchers become much more attuned to the possibilities and challenges of launching that next blockbuster product. They become better industrial researchers.

The person to make this happen is the Business Manager. Every research team has one. He or she is the titular head of the research team. This person is typically not one of the Fab Five. This person is typically motivated by WIIFM (What's In It For Me+), and not by the excitement of the hunt for that next blockbuster product. This person has full responsibility for interim funding of the blockbuster pursuit, either earned or funded by the corporation. This person is typically not a scientist.

There is one key difference in commercial operations+ that sets it apart from research operations: perceptions count much more as reality. If your product is merely perceived as being unsafe (e.g., Vioxx) then consumers will shun it. We’re dealing now in the political tier of evidence. Objective truth is submerged: not ignored, but is overtaken by the narrative. He who controls the narrative controls the perception. What we’re looking to do is to spin a convincing narrative around our objective evidence, one that gets people to buy our product. There are plenty of holes in the objective evidence, but we need to divert attention away from the holes and toward the bright spots. This is the role of the Business Manager.

Try it out in the commercial arena and if it works great; if not then we try something else. This is Entrepreneurship 101. The Business Manager is never blinded to combining our capabilities with capabilities from other firms: product and technology, electronics and services, services and financing, etc. Business Managers have no vested interest in products developed by their own company, and they are much less likely to shun insights found elsewhere. We take seasoned Venture Capitalists on a tour of our research acumen on the off-chance they may see investment opportunities we missed. What does it take to get our product into the hands of the consumer in a way where we make our customary profit margins? The Business Manager does not spend too much time explaining past attempts. They are always looking forward to that next attempt.

The Business Manager doesn’t know all the intimate rules of the games, but he or she knows and is trusted by the people who know the rules: the accountant, the lawyer, the patent attorney, the grant specialist, the lobbyist, the expert in PR, the industry consultant, the M&A expert. The Business Manager recognizes that the rules of the game are extremely complex, and that admission is never free. They insert the best of the best from the business world into the commercial equation+.

The Business Manager has a robust Rolodex and is always on the phone. He or she uses the phone as a business research tool. This individual looks across the entire research question: they make the reality of consumer-driven and technology-push happen. They never close down options, rather they focus on options that give the shortest path to cold cash.

The answer to commercial in research comes in the guise of the Business Manager. This individual commands the respect of the Fab Five and the rest of the research team, though not merely from their personality. The full weight and force of the funding agent+ is directed toward the support of this individual and their success. Researchers will often be distracted by commercial concerns if they wish to continue their research pursuits.

Further Reading