Open Innovation as a Service, featuring John Allies

In This Episode of Innovation Capital

Host Ray Chohan interviews John Allies of Strategic Allies Ltd. Ray and John discuss how “open innovation as a service” can enhance the innovation life-cycle; the tools, technologies and strategies available for finding innovation partners; and how to grow through innovation partnering.

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Episode highlights

• How using business networks to develop innovation partners has changed
• How to enhance the innovation life-cycle with “Open innovation as a service”
• What tools, technologies and strategies are available for finding innovation partners
• How to grow through innovation partnering
• Get our #1 Amazon bestselling eBook, The Definitive Guide to Connected Innovation Intelligence (CII). In this white paper, we explore what CII is, who it’s for, and how the world’s disruptors are using it to win in hyper-competitive markets. Download your FREE copy.

The experts

Episode transcript

Ray Chohan: So welcome, John, to Innovation Capital. Excited to have this conversation on this slightly mild Friday afternoon here in the UK. And John, I would love to open with just your backstory, how you ended up in the wonderful world of innovation, open innovations. It seems like you’ve been building your current organization, Strategic Allies, since 2006. Over 15 years – so it’ll be lovely to just set the stage and hear about your backstory. And then we can go from there.

John Allies: Surely, wow. That’s taken me back some time. So, I guess I did a materials and material science metrology degree, did an MBA after that. And found myself in mainly sales roles. And I then became probably a licensing expert to use a stronger word. I’ve got involved in licensing. Basically, I worked for some smaller companies who had some smart technology. And at the time, these companies were really cash strapped. The only way we could do it was to license it. So, I started out with a couple of small companies, licensing their technology, mainly into the States, and then into Asia, and then laterally… as a third route into Europe. So doing that, for some time, I really got to understand the sales, drug licensing/technology role. And then I joined a company in, when would it be, ‘98? That was called PAX Technology Transfer. And basically, they were what we’ve become now. So that was ‘98. And I guess I can trace our background back to those late last decade of the, of the 20th century, really. So, I started working with PAX, and they were acquired by an American company. I stayed a couple of years and then left and started Strategic Allies Limited, we call ourselves SAL (it’s much easier to say) in 2005 to 2006, as you said.

Ray: It’s interesting. When you mentioned PAX, you took me down memory lane there. My last organization, which was a wonderful journey, a great company called Data Monitor, we built quite a robust team, which would provide intelligence to the tech transfer community. Do you remember groups like Nesta, does that name ring a bell? They were called the “quangos,” weren’t they back in 2008, some of these organizations, but some of them are meaningful and do some great work. And I’ve seen things evolve a lot over the years, hopefully in the right direction. But it’s interesting, when an entrepreneur starts their business, what did you see in the market? When you were working for someone else? Within the licensing role? What did you spot in terms of a gap where you felt, I’m going to start my own company, because I see unmet needs or I see opportunity, what was some of the inefficiencies that you noticed, which inspired you to start SAL?

John: So, I don’t think that you know, that sounds like the classic case, doesn’t it, but life’s seldom like that. What happened with those is that I was working for PAX. We were acquired by a large American company, the American company had a very different model to what we were operating in PAX at the time. And that was around about 2001, the dot-com crash, can you remember? I think we were the last deals that went through before the markets absolutely tumbled. So consequently, as soon as the deal went through the large American companies sort of ignored us completely and got stuck into creating or shoring up their business. So, we were allowed to continue. But then, a year or two later, the American company came in, they wanted us to adopt their very, very good–but very US–model into Europe. And it just was never going to work. It was a very, very different model. And I won’t go into detail, but it was based on much more junior stock markets. So, the Pink Sheets and you know, those sorts of companies, which didn’t exist in the UK in Europe at the time. So, we sort of continued along a route and then I just left basically, I sort of had enough. Thought I’d take some time off. And then an ex-colleague of mine said, John, why don’t we start again? And it was it was literally that spark that I felt I was ready to do other things to be honest. And I thought, well, hey, why not? If the American company is now going to take our older company down a different route, there are lots of existing clients and a developing market that we could build into. So, I guess that was the origins of it. So, I saw this spot, I went for it. It was it was a set of circumstances that arrived with one conversation that’s often the case where someone says something and you think, yeah, there’s something in that. You bat it around a couple of times until you mold it into something that you think you can run with. And then you launch.

Ray: And it’s interesting, before this conversation today, I was doing some research prior to our call and digging up some old folders on an old laptop, because of the whole conversation around open innovation, technology transfer and tech scouting. And I can’t tell you how many reports I’ve downloaded and copied and pasted into a deck, or maybe present to a company and get everyone talking and discussing. And we’re fortunate enough to serve that community across so many different industries. And for me, there’s been periods where I feel like it’s stuck in the mud. Yeah, we’re not really progressing. If you look at the numbers, however, I’m always optimistic, optimistic by nature. And I’d love your sense of the current lay of the land, say, 2016 onwards… so that there’s great investors like Cathie Wood, who runs an organization called Ark invest. If that name rings a bell, leading hedge funds who purely focus on disruptive innovation. And there’s been some great pieces recently, I think, one piece by Azeem Azhar, he's published a book called The Exponential Age. If you’ve not checked that out yet, I highly recommend it. And then a couple of other pieces with Peter Diamandis. He’s done a piece called The Future is Faster Than You Think. And if I look at what Cathie’s done, where she came out two weeks ago, Greg Reed, and what Peter Diamandis is done with some of his pieces, they all connect to 2015 being maybe this kickstart, of the exponential age where we’ve got four or five technologies all hitting the peak of their stride… or not hitting their peak of their stride but hitting their stride at the same time. So blockchain AI… synthetic biology, underneath that, machine learning, robotics-it looks like we are entering potentially a special paradigm. And we are seeing it in the public and private markets in terms of the valuations and the confidence behind tech now. So, my question is, where are we now when it comes to industry really executing well and consistently on tech, scouting, open innovation and building out a solid framework around it? Where do you think we progressed the last five or six years?

John: So, when you were talking there, I was sort of going back, and I was mulling over a couple of things. And I think it’s changed massively. Just indulge me a little bit. And rather than go back five years, let me go back 20 years. So, 20 years ago, we were doing this. And we were working for medium-sized companies, mainly based in the UK, because we were based there. They tended to be owner-managed companies. And basically, we were saying to them, where’s your next product coming from? Where’s your next product differentiation coming from? And these owner-managers, they were very focused. They make quick decisions. They were a little bit creased in the pants, to be honest. And they were more focused on the next quarter than the next year. So, we were looking for product distribution deals, things that we could bring in and make happen. You know, it was sort of self-limiting in the number of quality clients you could have. But the ones that you did have tended to make decisions quite quickly and moved on with the process.

If you then go to the dawn of open innovation, and I don’t really know when that started, because there’s still some like ours who don’t really embrace it, I think. But suddenly, the larger companies started to hear from Chesbro and the likes about open innovation and it took a long time for those companies to understand what the concept was. I think Jasper was very clever, but he explained his funnel model and we’ve seen millions and millions of them, since it was not rocket science. It’s what most of the better companies were doing anyway. But it was a model that you could then talk about and get the bigger companies to adopt. And they did do that, but very, very slowly. And from 2015, I think you’ve now seen not so much a convergence of various technologies like AI, blockchain, etc., because if you go back 10 years, there would have been similar technologies that were changing the world. And then 20 years back, there were similar technologies that were changing the world, I think were on an accelerating graph. But it’s any one snapshot in time, you’ve got fundamental change going on.

So, when you talk about tech scouting, and I always must explain what we do, because we talk about tech scouting, often it’s partner scouting. Large companies, even though they have various departments, they’re quite focused on quarterly results, etc. They don’t often have the time to explore where they can find partners, and if I’m honest, probably most of them aren’t very good at doing that. So, when we talk about technology, we’re often looking for manufacturing partners, people who can take a technology into another territory, people who can tweak a technology slightly and make it better. It’s great if we think about a technology that’s going to change the world. But I’m afraid in any industry, most of the changes are incremental, rather than step change. And I think, because most of these large organizations are somewhat conservative, step change scares the living daylights out of them. Incremental is the way they want to go. Now, maybe sometimes that increment is bigger than others, but that tends to be the way that those large corporations move.

Ray: I mean, you see so many reports from the likes of BCG, I really enjoy some of the stuff that Innovation Leader publishes, and they’re all leading to a trend towards more bets around transformational innovation. And obviously, that’s survey data, right? But are you saying the reality is with large public companies who have a quarterly target? Let’s face it, it still is majority, incremental, and maybe some adjacent work is that nothing like it.

John: So, we work across all sectors from pharmaceutical to FMCG (fast-moving consumer goods), to aerospace, to food and bev, every single sector we work in. And therefore, by definition, we’re not experts in any of those sectors, we like to think that we’re experts in in finding and doing deals with technology or manufacturing partners. Our experience is that those large companies don’t have the appetite for massive step change. Maybe you’d get some people within those organizations who are visionary, and who can see what’s coming down the line and really want to embrace it, but they then have the political problem of trying to sell that internally. And that’s, that’s a big, big job. You know, there’s this big line that the company needs mavericks? Well, they sort of do, but they probably just need to listen to the people who are maybe not quite as maverick as the others who pick because it is difficult.

So, innovation is that different pack size. Is that six bottles in a carton rather than four? Or is it digital fluids-is it sending fluid down a digital line and reemerging? It’s in a special cup 5000 miles away? I mean, that sounds like science fiction. But it’s been proven. But will it be adopted as a consumer aimed product. The companies probably don’t think that the consumer is ready for that the infrastructure; isn’t ready for that all the legal things around that that usually scare them to death.

Ray: Interesting. So, focusing on the process of executing and building out a good framework for scouting and open innovation. Now going into 2022, what does ‘good’ look like in terms of the process? And what should organizations have in place to do this?

Because, again, you see so much published over the last 10 years by the usual suspects talking about building out an innovation radar, having alignment internally, having a good communication protocol democratizing and getting more people involved. But in your professional opinion, what are some of the kinds of top two or three pillars of best practice which is required to do this well?

John: So, I’m going to be biased, because I think that we do it better than any large corporation. And that’s because that’s all I usually say, it’s, this is sort of my pitch, when I’m standing in front of an innovation director, the fact is that they have a million and one things to do. We have one thing to do, we take your challenge, Mr. or Mrs. Innovation Director, and we will go and find you potential opportunities to solve that challenge.

Now, I think one of the hardest things for an innovation team to do is to find those articulations of the challenges within the business. If I go into a business, and I can say, I can solve every challenge that you have, I’m sort of joking a little bit here. But you know, if I was to go into a company and say that I would still have to keep battering and badgering to get the challenges, because a lot of companies do not. They don’t have the vision to look further than the next small step. You know, what is the next challenge? That sounds quite negative. And I’m not being negative, because there’s some great success stories around. But I think that the starting point for internal team is to articulate the challenges and get buy-in from the departments, whether it be R&D, or marketing, or whatever-though that’s the list of four challenges. And that’s priority number one, that’s priority number two. Now, how do we go about finding those solutions. And once you’ve done that, then we’re a tech scouting company, we have a particular way of doing things, there are other tech scouting companies who have different ways of doing things. And the internal team will have different ways of doing things. And if you had limitless budget, which I know is never the case, but if it was, you would engage all those options, because you really don’t know where the solution is going to come from.

You know, one assumes that if we’re being asked to find a solution to a challenging technical problem, we’re looking for the needle in the haystack, or we’re looking for a technology or a partner who can differentiate a client’s offering to the market. If we’re looking for either of those, one assumes that the internal team has already looked internally, and in their supplier network, and maybe you know, a little bit further out. So, when we get that challenge, it’s a tough one. And that’s what we want. We want those tough challenges. We will work our darndest to find the solution. But if you had limitless budget, you would be looking everywhere.

Ray: And in terms of difficulty level, where do you see some of the tough spots?

Sometimes it could be more of a challenge around transforming the business model. So that can maybe only be done by enhanced distribution or an external commercial partner. Or it could be a real tough materials science problem, where x material needs to be made 40% lighter, to make the outcome economically viable and scalable. If you put it on a scale from kind of ‘less challenging’ to ‘this is damn difficult’, what does it look like in your world?

John: So, I’m not judging the question, but you never know until you start to look. You really don’t know. So, both of those examples you gave, Ray, we are working on now.

We’re working on a company who are trying to build a new product portfolio separate to what they’re doing. So, they’ve got no history in the markets and we’re looking for development partners to help them formulate, and then manufacturing partners to help them distribute internationally, globally. It’s quite a business model issue. And at the same time, we’re looking for a graphene manufacturing process that has an ability to produce 3D heater formations. So you know, tough material when you mention graphene, everyone gets excited, and then realizes that it’s more of a challenge than they initially thought. So very, very tough, specific technical challenge to both of those clients, I’ve no, I wouldn’t be able to say that’s hard, or that’s easy, because you don’t know until you go out there. It’s a, it’s a journey of discovery.

I think we have a slightly different take on tech partner scouting, the fact that we have the databases, and we do all the scraping, and we do all the networking. But our focus is talking to people, it’s very people-centric. So, we’ve got access to about 1,500 people around the world who have networks of their own, and we start to delve into those people and have conversations. And until you have those conversations, which when you’re talking to humans are much richer than when you’re looking at a database, then things emerge. People you should speak to-you need to talk to this person in Asia, you need to talk to these people in Finland-by doing that, by having that process and being involved, it’s amazing, you can hit something within the first week, or a project that you thought might be slightly more on the simpler side, could take three months.

You know, and to be honest, even though that’s inconsistent, and quite difficult for the client to deal with, for the tech scout, that’s the challenge. That’s the interesting bit of the business. You know, it’s that discovery with both a technical hat and a commercial heart, because a technology that’s not commercially viable is little more than useless. So you have to have both the technical, the commercial, the cultural fit into the client, once you know, to balance all those pieces of the jigsaw, and they’ll be able to present something that that you think is worthwhile, and therefore, it’s coming from you. It’s a personal-I wouldn’t say recommendation at the early stage, but it’s the tech scout saying, I found this, I’ve done some work commercially, and technically and culturally, it seems to be in the right area. Now, have a look at it. What else do you need to know? That’s what motivates my team without a doubt.

Ray: John, could you unpack “culturally”? Because that sounds like an interesting vector. So, when you mentioned the word, it’s got to be culturally aligned, what do you specifically mean?

John: So, if we found a smart technology that addressed an FMCG client’s challenge, then culturally, we tend to be dealing at the smaller end of the company size. So academic and technical institute, yes, but startup. An SME is probably the big area, because, globally, that SME type of company is more innovative, and often lacks access to market, which is usually what our clients can provide.

So, if we find an SME that has a great technology, the ideal fit would be with a large company, but they talk a different language. One doesn’t want to disclose its secrets to the other one, or one fears the other, I’m using that word. In the right term, they’re quite scared. The small company will be scared they’ll be taken to the cleaners by the big company (wrongly). So, there’s a cultural misfit there. They even speak a different language that they maybe don’t have, the smaller companies don’t have the corporate speak, the large corporations do. So, there’s a great opportunity for misunderstanding, which again leverages that cultural problem. There are the financial aspects, there’s reporting aspects. So, I guess culture is a catch-all for all the things that aren’t commercial, technical.

Ray: Okay. And looking at that, say that materials science challenge, for example, at a 50,000-foot overview, what does your process look like end-to-end typically?

John: So, if we have a good client, the good client knows what they want. That’s not always the case. Another client might have an idea of what they want, in which case we’d have to work with them through a workshop or just, you know, a couple of conversations, refine it a little bit. Not too focused. You don’t want to be too focused. I think you need to be focused on the benefits you’re looking for, but open to alternatives, you know around that.

Once you got a spec, then we will write a one-page search back, that’s quite a challenge. You don’t get an awful lot of information onto one page; you must make it broad enough to engage with a very large community and diverse and disparate community. But within that one page, you must have some detail because if it’s too wooly, then people will read this and not really understand what you’re looking for. So, it must be broad, but there must be some good detail in there.

That one page search back is full of non-confidential words, so we can share it far and wide. But we never, never disclose who the client is. That’s always confidential. Often, we’re dealing with stakeholder-sensitive issues. And there are other reasons (like managing expectations, etc.) that we wouldn’t want to put the client’s name on it.

Once we’ve got that search back, it goes out to our 1,500 people around the world. The downside of having people is that they don’t respond like keywords, immediately, they take a little time to read and think, okay, that’s interesting. Now, who do I know, and so they go into their networks. So that might take two or three weeks before we start to see something back, which a lot of people sort of take a guess back, because that’s, that seems quite a long time. We don’t, we don’t sit there twiddling our thumbs in that time, what we do is we start looking into our knowledge database, because we’re talking to startups and SMEs, and institutes and academics around the world all the time and building up a knowledge database of things that are happening in every sector. And companies with technologies or partner qualities that are valuable. So, we’ll go into that.

And we’ll start talking to what we call low hanging fruit. Who do we go and talk to maybe some of the people that we’ve sent that search back to, we know they work a lot in that area? So, we pick up the phone, and we talk to these people. So that’s hoping to find some low hanging fruit, but it’s also benchmarking a little bit, it’s starting to benchmark what’s out there.

So after two or three weeks, we start to receive projects coming in from our network. So, somebody will say, a guy in Finland told me you were looking for something, I’ve got this company based in Helsinki, and this is what we’re doing. That will come in as a project, we will use this and filter it against our benchmark that we built up over last two or three weeks. And we’ll filter it against the search back. And if it makes those cuts, we’ll take a direct conversation with them. And we’ll ask them some more detail.

If it makes that cut, we’ll send a two-pager to the client that says this is something that you really need to be aware of, it seems to hit three of the four points that you’re looking for. Now, what else do you need to know? And because everything we do is confidential; we act as the intermediary.

So, the client tells us the questions they have, we go to the project, and we ask those questions. And we act in the middle, obviously hoping to bring the two parties together under the right confidentiality clauses eventually. But in the interim period, we act as the sort of veil of confidentiality that our clients can hide behind.

So, we first research for every 10 projects that come in. So, a search back is written, goes out to our network two or three weeks later, we start to get projects for every 10 that come in, and we may have hundreds but for every 10. Empirically, we know that seven of them, we can get rid of them at the first filter level, so they don’t quite meet the search spec.

The confidential information, our clients told us that we’ve not put on the search back, use that as a filter, and we can discount seven, the three that make that step we will take a direct contact with so wherever they are in the world will take a direct contact by email or by phone. So, we have the language skills to be able to do that. And we’ll ask them those other questions, the softer questions. Okay, the technology works, but who else are you working with? Who’s the team? What’s the technology readiness level? What’s the commercial situation as is, or investment needed?

All those other aspects that make a potential deal go through and because of that, that those three probably come down to one. So that one is the one that we send to our clients. And we look for some feedback. And whilst the client’s thinking about it, we will be sending another one that’s coming through the process. You know, it’s a process that delivers those one-out-of-10 on a regular basis, so that we try and build up a portfolio of opportunities that the client can look at and can judge against other ones that have come in externally or even other internally generated solutions or projects. So, and we can help them to manage those all together as well. So, it’s very interactive.

But I think one of the things that we try and do, if you’re talking to lots of people, it’s very time consuming. The large corporates are not, they’re not great at talking to SMEs. And many times, on many occasions, they don’t want to disclose what they’re looking for, they thought it may be sensitive, so they don’t want to go out to the world looking for something. So, what we’re trying to do is to manage that process, and keep the client at arm’s length initially, so that we’re doing the legwork. And then eventually, when we starting to bring the good opportunities to them, that’s when they must get involved. They’re the only people who can make the decision. So, they must get involved at that point. And then we work with them across 5, 6, 7, 8, 9 opportunities to filter down to the best ones and hopefully do a deal at the end of the day. That’s a long way. That’s a long 15,000 meter helicopter shot.

Ray: Brilliant, the more detail sometimes the better. And you mentioned an area where you cover benchmarking, can you unpack that slightly more? What do you mean by bench when you guys do your own internal benchmarking in a league? That is some of the external expert network?

John: Yeah, because we’ve been doing this for 15 plus years, at SAL and and nearly 30 years between myself and my co-director, we built up within the team quite a good knowledge across various sectors. As I say, we’re not experts in all sectors and can’t possibly be. But we built up a good background knowledge. We also have a series of associates who are specialists in those sectors. So, when we get a search, say in the beverage sector, we will first bring our associates in, they will help us to make sure that our knowledge is up to speed. But then going out talking to the people that we spoke to previously on other beverage searches, we can pick up on what they had then where it’s moved to, is it developed, has it been taken on? Did it fall to the wayside? What are they working on now? So, by doing that, you quite quickly get a good picture of a sector and the technology or partner level within that sector, which forms the basis of when new projects come in? Does it exceed or does it fall below that benchmark level? That’s sort of where we do that.

Ray: Okay, makes sense. This is useful. So, it’s a blend of, obviously, your own internal team in parallel with a vast expert network of about 1,500 contacts who then work in parallel, to reach out to their, to their networks.

So there’s one organization we bump into, from time to time, called PreScouter. Is it a similar type of methodology, in essence?

John: No, I don’t think so. Really, I think PreScouter is, I think the network is full of experts. Ours are not necessarily experts. So, we have associates that help us with the benchmarking. They are separate to the 1,500. We call them our smart, connected people. And I think that’s a good way of explaining who they are, they’re smart, because they must be connected, that’s the most important thing. So, they will be the head of a of an SME company or a group. There’ll be the head of an industry group. There’ll be VCs, there’ll be technology consultants, or tech transfer people. So, there’ll be people who operate in the area. But important to us is that we that each of them oversees more than two sectors. So, we don’t, in that 1,500 people, we don’t want an expert in healthcare. We don’t want an expert in food and beverage, we’ve got those associates who we love and trust. We want those people to be able to see across sector because that’s often where the opportunities lie. You know, you might see something in in veterinary science that you could bring into healthcare, you might see the other way around the various transitional technologies that become that we can find that way. So, it’s important that those people are not experts, but are smart and open. I guess the open innovation phrase comes to mind there, they must be open and engaged with as many people as possible, we try to, we try to get in our mindset, each of our 1,500 people will have 1,500 people in their networks, which means that we are covering a very pervasive industry spectrum.

Ray: That’s interesting. So, in essence, your external network of 3,000, really, because it’s a network of a network, by mindset, that they’re great at adjacent thinking.

John: Adjacent thinking that it’s not 3000? It’s 1,500 times 1,500.

Ray: Wow.

John: So, you know if they were all active, that’d be fantastic. So, I’m not making that claim. But you know, in theory, that’s what it is. It’s less than that. And we have some that are very active and very engaged with us on a regular basis, and some that are a bit more dormant, you know.

Ray: And in terms of economic model, how does that incentive structure work for your associates? It makes sense, obviously, there’ll be FTEs and a part of the family full time. Does it follow a similar model to the likes of GLG or AlphaSights where in essence, it’s an expert network, it’s called a model by the hour, have you spent time with them and interview and then try to enter that into a document?

John: No, I think it’s quite hybrid. So, remember, this network started in the 80s. And there are still some people who are with us who were there in the 80s. But it’s a very dynamic environment. So, we are gaining and losing people out of that network all the time. It’s quite dynamic, but the way they get paid is, in our business model, we charge a fee for service, but we have a modest success fee. And when a deal is done we get a success fee. And we share that with the (usually) one person who brought us that initial contact.

So, you can imagine there are 1,500 people out there, a good proportion of them have never learned anything from us at all. So why do they do it? I have asked myself that question a couple of times. I think it’s the type of people they are: they want to be engaged. We want to work with the people who want to be engaged, who want to be looking for new things, who want to be talking to two spectacular emerging and developed companies around the world and helping them to grow even further. So, we will compensate a small number of them when they’re successful. But I also think that a lot of them will have their own deals. So, they’ll be bringing us companies that maybe they’ve already struck a deal with, that’s nothing to do with me, that’s not part of my business model. That’s their business model and they may begin getting a deal off that side. So, I think in any tech transfer, tech scouting, innovation environment, it must be dynamic. And you must think of both the commercial and the technical aspects. And they are intertwined so deeply, but you must be open to various models to make it work. You must be flexible. It’s not a one-model-fits-all process.

Ray: It’s interesting, thank you for that. And we can talk about this model for hours because I find this space fascinating. Obviously, our world here at PatSnap is purely from the software. So, we’re like a partner too, in essence, that model you describe where we’re an online search platform, and hopefully this is complementary.

John: Yeah, well we obviously use you a lot, Ray. And we hope that continues. And there's big investment in PatSnap, recently.

Ray: Yeah, exactly. So, we’re playing in that part of the ecosystem, but one area, which is interesting: I just thought of friction, and a challenge with transparency. I understand why it must be that way now, but hopefully it will change in the future.

So, you mentioned this whole piece. Where do you initially have a client, they’re under NDA, the supply side don’t know who they are, obviously, you guys in a thoughtful and very clear way, try to arbitrage that communication. But is it fair to say therein lies some of the challenge, because there isn’t a framework where companies at scale can be open and say, yup, it’s Company X and we’re huge in the chocolate manufacturing space? Of course, you know who we are. This is what we’re doing within say, the nutraceutical space within one SKU of our number one selling dark chocolate. RG is like blockchain, federated data rooms, cryptographic truth, do you think we’re now probably potentially entering an era where both sides can be more open off the bat, then fasttrack and scale that communication to thus make it more efficient? Because that model you describe, I understand why it must be that way: completely do things like it’s stuck in the mud, like we’ve got technology now, which can, through cryptography and blockchains, enable a machine of truth and timestamping.

I mean, I know I’m talking slightly blue sky here. But what we’re seeing in the market, we’re kind of here really making up terms of tech, and then all the use cases around NFT’s and a whole bunch of things within patents. So, do you think as a potential future, which is an actual enabler for this space, will help you scale and, and evolve your model?

John: Maybe. I mean, certainly some companies are open about the things they’re looking for. But you know, they’re not open about the things that are sensitive that they’re looking for, if they have a manufacturing problem, or a sustainability issue, or a legislation that’s changed, and they need to find a solution quickly, they’re not going to be open about that, that’s where they come to us. And we act as a as that confidential shield that protects the stakeholder value.

But companies are still going out and saying, we’re looking for biodegradable resins, we’re looking for biodegradable brighteners. Lots of companies are being quite public about that. Because the fact that they’re looking is reflects well on them, and the fact that they’re being seen to be out there looking is reflecting well on them. I think they go hand in hand, as far as the technology aspect that you’re talking about. And all that technology that you mentioned is good and works, etc., etc. But you know, there’s lots of AI that’s coming into the tech scouting world. At the end of the day, you need a human being to make an assessment and make a judgement. And until we’re replaced, then there will always be a place for that human being to make that decision. So, I think that the technology will come and help. And anything that helps make the connections. And that’s the most important thing: the smart, tech-savvy, commercial-savvy connections. Anything that helps to do that will help to scale the business. But I do think that at the end of the day, it’s a very personal, very people-centric business.

Ray: And looking at more from an industry level, what would you say the top four or five verticals are, where we’re all on that journey, and they all need to improve, but do this well? Or are more fertile for it? Or are the easiest to work with? Because culturally and just by design, they’re set up to work well with SAL and, yeah, so a lot more fluid, what would you say the top four markets are in, in your professional opinion from the information over the years?

John: So, my problem is that the top for this quarter will be different to the next top for next quarter. Because it really does change. And you know, it’s more dependent on the people who are engaged with you, and we are engaged with the champion within the business, and what’s the technical and political clout within the business, that’s more important than which sector. So, food and bev is very innovative. And you know, that’s being driven by outside forces: the plant based opportunities, legislation, sustainability is affecting absolutely everything. I mean, so if I go back seven or eight years, we will have an occasional search that somebody would sort of say, oh, and it must be sustainable. Okay. Yeah, great, fine. Now, we, I would say that all our searches have a sustainability element to it that is serious. And not all but probably 50% of them are sustainability focused. You know, so we are looking for bio-based products, we are looking for low carbon products, we’re looking to reduce logistics. We’re looking for all those elements that are going to support the sustainability industry. So that’s one.

A sort of issue across, I guess, another one in the same way as sustainability is digitalization. So, I won’t disclose who the company is. But five years ago, maybe slightly less, I went to a large company and the innovation director said to me, John, we need to go digital, we need to do something on the digital side. I said, Great. What do you mean by that? And the bemused look, came back and the person said, I don’t know, really. But I’ve got to go digital.

Ray: So loose?

John: Yeah, absolutely. And, and that’s probably as loose as you’ll get. But that was because nobody really understood the space at that time, it’s now moved on quite considerably. And we’re finding digital recognition, we’re finding digital engagement, we’re finding it in the cosmetic sector, and the beauty sector in the FMCG, the medical device sector. So, digitization is a theme that’s going across all sectors. And that’s a really interesting thing. So, I think it’s hard for me to give you sectors, but I think those themes are probably more worthwhile.

Ray: That’s interesting, you’re seeing each quarter an eclectic mix of industries. And so, when you’re working at the people level, be it scouting trends, scouting tech, are you working with an individual? Is it a single team? Or is it large, multiple groups?

John: Within our company? Or was it within the client?

Ray: Yeah, within the client. Is it an individual sponsor? Or is it multiple teams? A large team? What does it look like internally?

John: So that really depends on the client. ‘I’ll give you some examples. We’re working with a large lubricants business based out of the US and they are looking for bio based lubricants and greases. The CEO of that business we did some work for five or 10 years ago, a good period ago. He’s a new CEO in that business in the States. And he’s come back to us. And he is driving cultural change in that business. And using innovation as a as a handle to crank that that machine. So, he is left, right and center all over the tech scouting that we’re doing for him and using it to illustrate to his colleagues, what’s available, what they can do, what the next step might be. So, he’s very, very focused. If I take another company that we’re working for, a large multinational, they’ve developed their own open innovation teams within the business that come out from new product development teams that were previously in the business, they’ve taken the most imaginative characters out of those and put them into an open innovation team. So, they are now trying to get the challenges from the wider business, articulate those challenges, do some searching for themselves. But they also know that by using us their confidentiality is protected. And we get it, when we talk to people, we have a way of asking questions where people will give us a lot more information, may I dare say without an NDA, than maybe they should. So, we find out more information than they do.

Companies are much more open to a discussion about a technology that they are really keen about. But if it’s a big corporate talking to them, they tend to be a bit quieter. So, we’re still working for that client, but they have a sort of intermediary, open innovation team who is gathering the requirements from the larger corporate. That’s great, in some respects, pros and cons to that. So, the good thing is that they understand open innovation, they understand scouting, they are pulling those problems from the wider group, which is as I said, that’s one of the hardest things to do. I guess the downside is that when they briefed us, we’re not being briefed by the Problem Owner, we’re being briefed by somebody in the middle. So, some of the passion, some of the problem, some of the subtleties get missed a little bit and that we must fight our way through that. The obvious way is to try and get, you know, the subject matter expert, the tech expert from the corporate, into the conversation, into the room, and we do that. So, it’s very different. You know, some of them are individual champions. Some of them are teams.

Ray: And when you mentioned the SME is sometimes backstage. Is it by design? Or are they quite introverted?

John: You know, that’s the stereotype, isn’t it? But I don’t hold with it to be honest. I can think of the SMEs that I talk to across all sectors. And I think the word that comes out wrong is passion. You know, they are the expert. And they may be a little bit blinkered. But that’s where we come in. We can help them to take those blinkers off and see things that they wouldn’t normally entertain. And the good ones of those will embrace that and will want to learn from the subject matter experts, because they want to learn, they want to be knowledgeable. So, we can bring interesting things to them. That’s how we get them engaged. So, the back room, nerdy person, I think, is a thing of the past. That stereotype’s long gone.

Ray: And one point I forgot to cover off when you mentioned that process of end-to-end, and hopefully you get a two-pager in front of your client for them to kind of decide to go or no-go. How long is that process typically?

John: So, I said that what we do is we take two or three weeks to start that process coming in. So, we would normally have that first two-pager on the client’s desk in three to four weeks. Now, it might take a little longer, but we could have something that we’ve got already in our knowledge base that we can put on the desk within a couple of days. But usually, two to three weeks is the first one. And then we would expect (and this, again, is dependent on the challenge) to be placing another one every week. So, in three months, you’re going to get 10 very well filtered, potential opportunities/solutions, depending on what you’re looking for.

Ray: Once you get that flow going, where you are building out that velocity, and where it seems like the first two pages take that ramp time and then you’ve got things running in parallel, so you get further speed of execution. What’s the percentage, which leads to some form of conversion in terms of say you have presented 10 over a three or four month period? That leads to a client saying, well, let’s pull the trigger. You found something meaningful? Let’s do something. What does that typically look like in your world?

John: So, one of the downsides of my businesses is I’m out of control of the final decision. That’s always been my sleepless night problem: How do I get the corporates to decide on this one? And I can’t influence that. And if you’ve got any ideas, then hey, I’d love to hear them!

So, we have a closer KPI that says of the flood of opportunities that we send, we would expect our clients to want to see, as in physically meet (whatever the world that means nowadays) a third of them. So, one in three are significantly of interest after we’ve done some further questioning that’s been based on the clients’ requirements for the client to say, yeah, I think we should meet those guys. And then we set up a CDA. So, a third of the things that we present, and remember, we only present 1/10 of the things that we probably see, get the opportunity to get to the next stage. Don’t ask me what the next stage is, because some years it can be fantastic. And some years it can be really dry.

Ray: Yeah, it makes sense. And, on a broad level, that challenge is around scouting. So, I’m guessing we’ve all done it: consumed a lot of that survey data from the likes of BCG McKinsey. Again, I mentioned Innovation Leader, I really enjoy their work and I think Innovation Leader in specific did a piece in 2018 or 2019, where they talked around some more challenges. And number one was connectivity to the business, number two, identifying what area to track or scout and number three being time. Would you say that’s a fair top three, or do you see something more nuanced in the market?

John: So those are problems that the corporate team is experiencing, isn’t it?

Ray: Yeah, scouting then going and getting the ball rolling.

John: Yeah, that’s an interesting one. You know, I think that a lot of our clients are using us to explore future areas that they don’t have the time or resource or expertise to explore themselves. And I think that’s a really good use of our time. So, the clients are focused on quarterly figures. But they might be saying we should be doing this in green, or we should be putting this into an active, or we should be making an excipient out of this. But they don’t, it’s an idea. So, they can come to us. And we will probably do a landscape first, who, who else is doing excipients in this area? You know, and what are the benefits? And what are the cost benefits in that landscape? Where it’s operating? Are they big companies, small companies? Are there any acquisition opportunities in that area? So, start with a landscape and the client can go, okay, yeah, that looks quite interesting, or no, we’ll stay close at that. On the interesting ones, they can then focus down and say, Great, now, can you go find some companies that we can partner with in that sector, then we start doing what we would call the normal scouting where we’re reaching out and engaging with people. So, I think that’s, that’s a good use. I don’t think I’ve ever met somebody with the title tech scout in any corporate who is 100% on tech scouting.

Ray: Just pause there. So, we see that job title in abundance. Are you saying that that’s their job title, maybe on LinkedIn, or on their business card, or their digital business card now in this world? But if you dig in, it might be 40% of their job and they’re working on other activities as well, and other KPIs?

John: Yeah, they are often being pulled pillar and post, they tend to get that role, because they engage because they have that mind and that personality to be able to engage and make some early assessments. But those qualities are in demand. So, they tend to have other responsibilities.

So, I think, to use an external body like ourselves and the others would the clients know, they’re getting 100% of that time focused on that problem, that potential opportunity, that landscape, they know that they’re going to get a result within a certain period? And I think that’s probably one thing. So, resources are one. Connectivity-explain to me what was in the report about connectivity?

Ray: Yeah, that was number one, it seems like, connectivity to the wider organization. So imagine us to our trailblazers who have got sponsorship to spend, say, 50% of our time on tech, scouting, just getting that connective tissue to the rest of the organization, I’m guessing if it’s a global company with say, 20,000 employees, just kind of winning hearts and minds and getting people listening in from their day job. I’m guessing that’s what came out as number one. That was 58% in the survey.

I can understand that. I mean, that’s the political job, isn’t it? And it’s difficult. And you need somebody senior, and somebody who’s been in the business for a long time, who therefore has built those relationships, that they can influence people and bring them around to their way of thinking. So yeah, that is important. But I think connectivity works the other way as well outside of the organization. And I think that’s quite difficult for, let’s be generous and say the two or three people in the business who’ve got tech scout in their in their title, who are not 100% tech scouts. That’s a real challenge. And so, this is interesting. I’m quite surprised to learn this today. That their job isn’t full time tech scouting because it’s something which I didn’t think about before, nor do they mention it when you engage him, you don’t realize that wow, this is probably for 40% of your day job. Is that changing in the marketplace where you are seeing yeah, I do this full time, John, this is my role?

John: I don’t know is the honest answer. I don’t know whether it’s changing. But I think what you’ll also find is that you know, the person who’s doing the tech scouting, then find something that’s interesting, and then must do the internal selling and the business case preparation and the political sounding, and that that means that they’re not tech scouting anymore. So, it’s a multi-disciplinary multi-role that that person is trying to deploy within a large organization. And it’s a challenge. I honestly think my opinion that it’s harder to do tech scouting in a large organization than it is to do in a in a company like ours.

Ray: While you were talking, I just love doing this job running a search on LinkedIn, by job title, I just go to US, and I just put technologies scout, technology scouting, and the nomenclature on the job title is nuances. Senior Program Manager, innovation, Senior Product Manager, stroke innovation. So, I get what you mean, it’s not crystal clear. Seems quasi hybrid. Partly their job. And, if you look at the job description, some of it does read very well, like, wow, this is probably a true customer for sale, or perhaps not.

John: I think also you have to think where I’m coming from. I’m coming from we are 100% tech skills. So, my view is slightly biased, isn’t it, obviously. And I think, as I said, I think the tech scouts in the large corporates have a really, tough job, tough job. Because they tend not to be the most senior people. And you need to have political technical credibility to be able to influence the wider organization. And that’s hard, you know?

Ray: Yeah, it seems like it’s always the case, people are the problem. In many cases.

John: And the solution. Having been in this business for a long time, that transition between the smaller companies and the owner-managed businesses through to the large corporates-that transition took time to go through. And then once the large corporates have decided, this is interesting, then there was a period of, so who does this? How do we do it, and who has responsibility for it? And the big breakthrough for us was when the term innovation director started, because innovation director is hopefully a shortcut for influence or a decision maker, not always, but the innovation director has responsibility for innovation. Of course, that means different things to different people as well. But you know, that, that they tend to be our target people within organizations, because they hopefully are senior enough, and hopefully have enough political technical credibility, to influence and to make change.

Ray: And one thing that we’re observing, John, I’d love to get your insight on this as well. We are seeing a decent trend where this is getting slightly more democratized, meaning you might have heard of R&D saying for my specific tech domain, within this materials project, I have three people participating in, or maybe even owning, tech scouting. So, it lives within R&D, or, for example, corporate venture is where the guys and girls signing checks, deploying capital in emerging startups, taking equity positions in companies, which we maybe buy in the future. So, we own or partly own tech scouting. So, trend scouting. So, did you guys see it as well, where it just sits outside? Classic innovation but sits in R&D or corporate venture or strategy?

John: Certainly depends on the company. I mean, they’re all good points. So, the corporate venturing side is a whole different ballgame. Because you do have people in there who, who are challenged to engage with startups. And you know, once you talk about the startup environment, there’s nothing more dynamic: A company that you see on Wednesday that looks fantastic could be gone on Monday. And another one that started over the weekend is better. So, that’s an incredibly dynamic environment.

The corporate venturing side, I think is a good area for us. We’ve done quite a bit of work, particularly on the landscaping side on the corporate venturing side of corporates, mainly because they tend to be smaller teams, and therefore need extra resource and you know, experienced resources are difficult to come by. So, we’ve been quite busy in that area. The R&D ones a difficult one, isn’t it? Because there’s a dichotomy, I think, in R&D and open innovation and you know, it says it’s as old as the hills. Not invented here. Yeah, the R&D Director, he or she is supposed to develop the next range of products, you know, and solve the next group of problems. That’s their job. That’s the reason to be and their team is focused on that. So, when the marketing director comes in and says, oh, I’ve been told about this company, and in Australia who have the solution, there’s a temptation for the R&D director to not listen. So, I’m probably being a bit controversial, but I think that the R&D has an absolute pivotal role. But I don’t think it’s an innovation role. And I haven’t heard many R&D directors taking responsibility for innovation, innovation directors, marketing directors, new product development directors, corporate venturing, teams. R&D need to be involved, but I think they’re more focused although if I was running the business, they’d be more focused on the short- to medium-term objectives.

Ray: And one final point more on the buy side, so the bigger folks, from what you shared today, this is interesting, and then please correct me if I’m going down the wrong route. But you mentioned, most clients do want to play typically safe, and I’d completely understand if they’re public, it’s a quarterly target, even if they’re larger, private, it’s still a quarterly target. And that type of environment, that’s the reality of the operating room for most of these companies, to be fair, which I understand right down from the CEO and the board to the kind of people executing day to day. So, it sounds like, yes, they’re working on incremental innovation problems, majority of the time, maybe some adjacent work. But they will come to an organization like SAL because that incremental innovation challenge will probably come from an adjacent marketplace, possibly transformational approach, even though the end outcome is an incremental piece of innovation, the actual answer is adjacent and potentially transformational in terms of industry on the supply side, is that fair kind of umbrella statement?

John: That could happen, but it could equally be that what they’re looking for is sat on the shelf of a competitor, and the competitor is not using it anymore, and has got no interest for it. And therefore, we might be able to pick that up and get a license for that or have I would have had our client get a license for it. So, is that transformational? I’m not sure. It’s not from another sector, it’s for the same sectors from a competitive client. I think it’s difficult to pull trends. It’s difficult to say, what individual corporates are looking for. If I had to, I would say that there is a constant drive to make incremental improvements. That goes without saying. That must happen. And that can be done internally the R&D team probably will know the product portfolio, and we’ll be working on that. But it could come from outside. You’ve then got challenges that the culprits are facing, you know, a real technical problem that they’ve been there for ages, and they know it’s been there, and the R&D team have tried to tackle it and not been able to tackle it. So that’s when it could come from outside and certainly that could come from another sector. A solution could come from another sector or an emerging sector. You’re then got all that digitization, sustainability, opportunity, problems, challenges that the corporates are having to address. You know, I was having a debate with a client the other day, and we were debating whether sustainability is being driven by legislation and regulation or by the consumer, and we had different views, but it’s being driven and it’s being driven hard. So, every corporate is looking for is now addressing its whole portfolio, and its manufacturing practices from a sustainability angle. And, and that there’s enough there to go on for the next five years. So there are different challenges coming from different areas. And I don’t have a brain big enough to say where those where those trends are coming from now.

Ray: Okay, well, it looks like we’ve really unpacked the buyer side, two final areas, which we’d love to cover is more the supply side. So, the world of tech transfer, SMEs, midsize businesses, it’s interesting that there’s an abundance of capital in the markets right now. So, you could be an early stage innovative materials company, for example, we’ve got a bunch here at PatSnap doing amazing stuff. You can fundamentally go it alone, because capital is basically abundant. So, are you seeing challenges on the supply side where there is maybe a shortage with some of the top tier guys and girls say, listen, we’re competing, we’re going to eat their lunch? So, we’re not really interested in licensing or, or slicing any part of our technology off, because we want to in this market and be the disruptive force. So, are you seeing any emergence of that or that impacting the supply side?

John: No, not at all. I mean, it’s cyclical, isn’t it, that capital is cheap, then is expensive, it’s abundant then it’s not, that’s the cycle that happens, what,every two, three, whatever number of years, there is no shortage of innovation.

You know, there’s no shortage of smart ideas that are starting to be commercialized. Whether that happens in a university or in a technical institute, it has its own problems of trying to bring that out, whether it happens in a startup that originates outside of an academic environment, or inside, that there’s enough of those coming through. There’s an abundance of technology, innovation, and manufacturing practice coming out of the SME environment. Globally the SME distribution of companies in Asia, and America and Europe are very different, they address different problems and have different solutions. So, what might be a tricky problem in Europe, we might find a solution for that in an SME environment in Japan, so there’s no shortage of innovation within the SME environment. I think, if I’m being brutally honest, the innovation shortfall is in the large corporates. And I’m glad that’s the case. Because whilst those large corporates are looking for innovation they they’re trying to deliver it themselves, but the better ones are also looking outside for where they can adopt it, change it, acquire it, adapt it, that’s what I think will probably always be the situation, they have access to large markets, they have access to capital, there’s an arms race, as far as innovation of features and benefits are going on within the corporate world. So, they must keep moving, they must keep innovating. And they must rely on other people to help them to do that.

Ray: And one final area and this one drives me nuts. And I’m sure you as well in terms of how manual the process is. But we are seeing some interesting innovation on that side, which we could probably talk about another day. It’s the execution of the license phase. So, if you look at the way it’s done now, a lot of it is obviously involves a lot of human capital. A lot of lawyers, a lot of that work ends up being a simple license agreement. So, both sides leaving chips on the table, no uniqueness and a business model where you can slice and dice things, maybe pay as you use those types of more smart models where it’s, it’s just better for both parties. So, I am using any potential innovation on the licensing side where things are done via technology, not this old fashioned way of human-to-human with a bunch of lawyers in the middle. A boring, flat, simple licensing agreement.

John: I’ve got this vision of going into a lawyer’s office and seeing stacks of paper and seeing the lawyer peeping over the top of two very large piles of paper and one’s much larger than the other usually. I think it’s Dickensian. And I don’t think it’s changing. I would have to say that from our perspective, because we work with the very large corporates, they have their own legal department, so we don’t really get involved with the licensing detail. I’m sort of pleased about that, to be honest, because as you’ve just outlined, it’s a bottleneck, and you can have the best technology, the best deal the best people, and it still falls over because of the licensing negotiation.

My background was licensing. So, in my early days, I was licensing technologies out to mom and pop shops in the States and, and plating facilities in Japan and in Asia. And it was a hard job then, even when it was one person to one person I was talking to the owner of the mom and pop shop in Phoenix, and sat over a table, and it still takes a long time. I don’t see that. I don’t see that becoming quicker. In my personal experience, I’m sitting here with my two fingers crossed, that it will be, and that maybe it’s happening in the background, and I’m just not privy to it, because it’s not an area that I get involved with. But you know, it’s ripe for innovation, isn’t it?

Ray: Yeah, cuz it seems insane. Because you have your team do all this fantastic work at scale in terms of sourcing meaningful opportunities for the client, the client spending time and money on digging into this and executing? It’s shocking how much value could be lost in the execution phase of the license because it’s not done in a dynamic way or a thoughtful way, where both sides are leaving chips on the table. Is that common in the marketplace?

John: As I said, I’m not involved in the practicalities of those deals very much. But obviously, I would influence because I want to see a deal done. I would say that most corporates now don’t want to license-they want to acquire. So, a license would be considered, but most of them want to acquire. Now, if you’re talking about a startup, or an SME, that’s its potential, it’s possible. You often get a maybe a joint venture with a license involved, that sort of an intermediate meeting period, where both parties come together and work together under a different shell. But generally, the corporates are an acquisition. That means it means that they don’t you get into issues of warranties and guarantees and, and things like that when you get involved with licenses. I think most corporates just like to acquire and then their legal department can bring that technology into their legal requirements.

Ray: Brilliant. Well, I mean, we could probably talk for hours John, today’s been an interesting conversation, learning about your world and all the different perspectives. So hopefully we can get you back for part two. I really enjoyed the exchange, and you have an awesome weekend.

John: Ray. It’s been a pleasure, and I’ve really enjoyed the time speaking to you and yeah, I hope you have a similar sunny weekend.

Ray: Wonderful, excellent.