Research and innovation are often mentioned in the public debate as key fundamental ingredients for the creation of a prosperous and successful future for society . With this rationale in mind, the European Commission over the years has been consistently supporting international research endeavors through the different framework programs of research and development. More recently, with the Horizon 2020 program, the total budget devoted to this policy reached €80 billion , a remarkable injection of financial resources devoted to exploratory activities expected to contribute to the construction of a more competitive, sustainable and equitable society (often referred to as “smart growth”). Despite such efforts, the European Union has been experiencing a significant gap towards United States in the ability to generate prosperity for its population. The graph below shows the persistency of the gap in terms of GDP per capita for over twenty years. A situation that impacts Europe’s number one political priority - employment - generating unemployment rates almost twice as high as those present in USA.
A study on science, research and innovation performance in the EU published by the European Commission in 2016  while discussing the situation depicted above states: “The EU has fantastic strengths. It is open, diverse, and hosts excellent institutions. With Horizon 2020, the Union funds research and innovation on an unprecedented scale. But we face three major challenges. First, we need to strongly improve our track record in getting research results to market and technologies developed in Europe are often commercialized elsewhere. Second, although Europe generates more scientific output than any other region in the world, we often fall behind on the very best science. Third, Europe punches below its weight in international science cooperation and science diplomacy”.
This post intends to focus on the first of the three challenges mentioned above, namely: the ability of getting research results to market. A problem that the report links to a number of contextual causes: lower availability of venture capital funds, national R&D investments below the 3% target, barriers to entrepreneurship, intensity of public-private collaboration to name a few.
The focus however will not be on exogenous variables on which researchers have little or no control but rather on endogenous aspects having to do with the design and the management of international research projects. The reminder of the post will briefly introduce the “journey from the lab to the market” (JLM) methodology that was developed by the Innovation Development team at ISMB and, subsequently, illustrate its application to a recently successfully concluded H2020 innovation action named FREME.
The JLM methodology
Acknowledging that recent years of crisis have called for innovations able to generate tangible business opportunities resulting in economic growth and job creation, the H2020 program demands remarkable focus on impact, coupled with a reduction in the distance between project results and the competitive market, especially when it comes to the Innovation Action funding scheme.
To help awarded consortia in answering such pressures, ISMB analysts developed a methodological toolkit known with the moniker of 'journey from lab to market’ (JLM), which unpacks the journey that every consortium has to undertake in order to turn research-led project results – data, algorithms and technological assets at large – into sustainable business ventures, either brand-new startups or new business lines within existing organizations.
Such a journey is framed around four macro-phases, each of them building on the previous one and attempting to test a number of hypotheses about the needs satisfied by the product/service provided, the appropriateness of the channels available for distribution, the match between the willingness to pay of prospective customers and the pricing that may be applied, the magnitude of expected returns and the fierceness of direct/indirect competition in the relevant market, etc.
In this journey, first of all, consortia (and especially commercial partners) face the pressing need to understand whether project results match what users actually want: this ‘problem-solution fit’ is the outcome of an initial exploratory phase that hinges on value proposition design, testing and refinement.
Once commercial partners are confident that the offering creates value for their customers, they have to ascertain their capacity to appropriate a substantial slice of the value they generated: this ‘product-market fit’ is achieved through the iterative design and validation of innovative business models, either company-specific or related to a multi-actor ecosystem.
Looking at the phase immediately after the market debut, the ‘business viability’ stage deep dives into the competitive arena with the aim of evaluating sustainability and scalability of the business model previously devised. This passes through the assessment of the market landscape and competitive threats posed by best-in-class rival offerings, while quantitative financial projections through indexes and key performance indicators are then the litmus test for staying in the black once the grant period is over.
Finally, the widespread diffusion of project outcomes can result into multi-faceted societal impact that are not visible while looking solely at P&L statements. The extent to which this capitalization can materialize is investigated through state-of-the-art impact assessment techniques that factor-in also social and environmental dimensions.
Taking a helicopter view on the 'journey from lab to market’, it goes without saying that companies often go through many iterations before they find a sufficiently large and lucrative set of customers that resonate with their product, either inside or outside the boundaries of a project backed by a funding agency. This evidence calls for a mechanism allowing to continuously incorporate market feedback and outcomes of hypotheses tested into the business development process. As a result, the 'journey from lab to market’ leverages lean startup and customer development principles to favor hypothesis-driven experimentation as part of an iterative development based on MVPs tweaks and pivots.
The FREME case
FREME (Open Framework of E-Services for Multilingual and Semantic Enrichment of Digital Content) has been a two-year Innovation Action funded by the European Commission under the Horizon 2020 program. The project was aimed at building an open, innovative and commercial-ready framework of e-services for multilingual and semantic enrichment of digital content. The resulting framework works by harvesting vast amounts of structured and unstructured datasets (e.g., linked open data resources, proprietary taxonomies and ontologies) and then reusing them in its enrichment services by means of six technological pillars offered through well-defined APIs and GUIs according to a modular product architecture: (1) e-Entity; (2) e-Link; (3) e-Terminology; (4) e-Internationalization; (5) e-Translation; (6) e-Publishing. Such a portfolio of e-services – instantiated on an elastic cloud infrastructure – has been made available to three real world commercial business cases that brought FREME data innovation and technology transfer directly to the market. This occurred through three FREME-enabled ‘killer applications’ situated at different stages of the data value chain: (1) translation and localization; (2) cross-language data sharing and access; (3) personalized recommendation. The innovation ushered-in by FREME resulted ultimately in an innovative technological platform that tears down entry barriers that SMEs and startups encounter nowadays in approaching Big Data markets, and in a new breed of business models for capturing the untapped value residing in data integration.
The consortium responsible for this challenging endeavor was made up of four technological partners – DFKI acting as project coordinator (Germany), Tilde (Latvia), Leipzig University (Germany), and iMec formerly iMinds (Belgium) – three world-class commercial partners – VistaTEC (Ireland), AgroKnow (Greece), and Wripl (Ireland) – and ISMB. Within the scope of the project, ISMB was in charge of business modelling and business development activities underpinning the commercialization of FREME technological solutions. Moreover, ISMB coordinates industrial liaisons as well as dissemination and communication activities.
As an ambitious market-oriented H2020 Innovation Action, FREME has considered the stream of activities related to exploitation as fulcrum for making project results sustainable over time and purveyor of impacts for project partners and well beyond. Along these lines, the three business cases have represented the exploitation backbone as they were driven forward by a clear commercial perspective and they represented the key opportunity to harvest the fruits of FREME in a short-term perspective.
VistaTEC, headquartered in Dublin with overseas offices, is one of the world’s leading provider of localization solutions. Within the scope of FREME, it successfully harnessed the notion of enriched translation to transcend the ‘red ocean’ of bloody competition peculiar to the language market. This passed through the launch of ‘Deep Content’, an entirely FREME-enabled business line based on automatic content enrichment meant to provide customers with multilingual content that is richer, more interactive and, thus, more social. Technological innovation, mainly represented by the possibility to establish private data spaces to turn translated content into seamless and compelling content journeys, has gone hand-in-hand as with business model innovation, as the company has unveiled a new pricing mechanism that is wreaking havoc in the industry.
AgroKnow is a thriving SME, headquartered in Athens with a global customer base, that helps worldwide organizations to extract value from data integration and data intelligence in the agri-food domain. As part of FREME endeavor, the company unveiled ‘WeSupport’, an holistic package composed by multiple modular offerings that are conceived for agricultural open data holders. While taking advantage of advanced semantic web technologies to enhance information discovery capacities, AgroKnow tweaked its business model by crafting an additional value proposition targeting private companies willing to crunch a substantial mole of agricultural data in their R&D activities.
Wripl, a Trinity College spin-out startup headquartered in Dublin, provides research-led solutions for content personalization, primarily for marketing purposes. FREME underlying technologies have been exploited by Wripl to inaugurate ‘Cognitive Content Solutions’, a full-fledge suite that supports content strategy as a whole by addressing the two core areas of content creation and content delivery. While launching new technological features in terms of predictive analytics and automated multilingual coverage for non-English content, Wripl has applied a ‘blue ocean’ thinking that looks at non-customers in lieu of customers. Instead of concentrating on finer segmentation of customers already served by the industry and on tailoring the offering to better meet traditional customer preferences, Wripl chose to prioritize underserved segments – residing in sectors that are content-intensive but, at the same time, laggards in digital transformation – taking advantage of powerful commonalities in what such buyers value.
In such a setting, the overarching exploitation strategy crafted by ISMB analysts was framed around three interdependent directions:
- Drive customer acquisition, by setting the road to market for FREME-enabled commercial solutions through activities such as prospect profiling, market assessment, competitive benchmark, price setting, financial projections, risk exposure analysis, etc.
- Monitor customer acquisition, thus applying innovation accounting metrics for tracking in a granular manner the process of onboarding along the customer acquisition funnel.
- Accelerate customer acquisition, by means of dissemination actions (e.g., top-tier sectoral events in the realms of big data and language technologies, trade fairs, product roadshows, F2F private meetings, webinars) targeting specific customers segments.
To orchestrate such streams of activities, ISMB team scheduled a number of milestones to be attained on a monthly basis in terms of market validation results. To keep the process under control, ISMB analysts release a Web-based environment – known in the project jargon with the moniker of ‘tableu du bord’ – which allowed commercial partners to plan and measure market uptake. Business case partners, in fact, had been facing a pressing need to define, measure, and communicate progress with internal (e.g., company executives) and external stakeholders (e.g., European Commission as funding agency, external private investors, business accelerators) well before the materialization of first visible results (e.g., contracts, invoices, impact on P&L statement). To use a metaphor, first visible results mentioned above could be seen as the tip of an iceberg that appears clearly visible above the surface. However, as an iceberg floats in the water, the huge mass of it remains below the surface. By analogy, the need of BC partners was to capture the tremendous amount of results, although preliminary and not necessarily conducive to sales, that happen prior to actual sales all along the customer acquisition funnel. To keep these aspects in the radar screen, ISMB analysts resorted to the well-known AARRR pirate metrics, which have been combined into a comprehensive framework providing for each business case the following metrics:
- [Acquisition] Prospects engaged in bilateral vis-à-vis/virtual meetings and/or business pitches.
- [Activation] Prospects involved in hands-on testing of ‘killer application’ MVPs and subsequent feedback questionnaire and/or interview.
- [Retention] Prospects entering pilot experimentations and related negotiations after having satisfactorily completed the MVP testing.
- [Referral] Prospects acting as brand advocates.
- [Revenue] Prospects turned into paying customers via deals signed.
When it comes to results achieved at the completion of the grant period, the innovation accounting metrics shed light on figures that appear impressive for R&D funded projects. Not only the Consortium has met the target of 200+ prospects involved in market validation – set by partners as internal goal – but also generated a powerful sales pipeline on which commercial partners are building for conversion purposes:
- 206 prospects engaged through commercial dissemination activities.
- 168 prospects involved in MVP-based market validation.
- 23 prospects entering the early adopter program as follow-up of MVP testing.
- 8 prospects generating prospective contracts prior to the project completion, which amount to more than €150,000 per year of revenue.
In addition, FREME ‘killer applications’ have become the flagship offerings in companies’ marketing campaigns while attracting into early adopter programs high-caliber prospects including household name such as FAO, Expedia, and Salesforce.
Due to confidentiality reasons, further results – which have been reported in full-fledged business plans elaborated by ISMB analysts – cannot be disclosed in this blogpost. That said, just to provide the reader with a flavor of the high-potential solutions ushered-in by FREME project, prospective FREME-enabled revenues, if materialized in a 5-year time horizon, would allow business partners to multiply (on average) by 15 the EC grant received, thus corroborating the viability of the investment undertaken by the European Commission as funding agency.
Such results – which has been accompanied by IPR arrangements defined by ISMB team and supporting sustainability measures (e.g., the hosting of FREME technical installation at the ADAPT center in Dublin) – have witnessed the FREME capacity to stand out in triangulating business ambition, scientific excellence, and search for impact on society at large.
All this is not only a perception of ISMB team, but it reflects the outcomes of the final project review, whose verdict clearly states that the “project has delivered excellent results with significant immediate impact for its participant’s business cases”.
The role of ISMB team was recognized by the Commission as crucial for this outstanding success. The EC acknowledged that “the business modelling approach provided significant guidance to the projection and provided the necessary focus on business results and measurable market impact” and emphasized the centrality of ISMB’s innovation advisory role in the project landscape: “a business partner like ISMB in the role of a project consulting organization is valuable for offering tailored business perspectives together with the provision of the needed tools and methodologies to pragmatically addressing the construction of a business plan. […] This type of support should be considered for similar future projects.”
Takeaways and lessons learnt
Drawing on the extensive fieldwork experimentation with JLM - within the scope of FREME as well as in a wealth of other H2020 and EIT projects - ISMB analysts have realized that an approach in this vein activates a new innovation kernel that challenges some of the most ingrained habits in the circle of organizations familiar with EU-funded projects. In fact, the JLM approach implies substantial changes with respect to the sectoral status quo, which are summarized as follows.
- In terms of mindset, exploitation is no longer an obligation to be dealt with in the second half of the project lifecycle, but is becomes the heart, the engine and the metronome of the project. This pronounced penchant for ‘beginning with the end in mind’ – since the dawn of proposal drafting – results in a continued market-oriented approach that, in turn, bring the exploitation thinking to the forefront.
- When it comes to timing, this approach allows to accelerate technological development when needed and to keep pace with fast-evolving market dynamics: this marks a discontinuity with respect to rigid implementation-driven Gantt charts that usually determine the schedule of project activities on a contractual basis.
- In regard to project monitoring and control, in the current state of play the progress of EU-funded projects is ultimately dependent on project management metrics related to the adherence with what is stipulated in the binding contract with the funding agency. Conversely, placing prospect engagement at the core of project development abruptly alters the performance priorities: this makes explicit the need to shift to metrics that capture specific prospect behavior – such as for instance AARRR innovation accounting metrics – with the purpose of keeping track of the progress along the customer acquisition funnel and facilitating possible growth hacking tactics.
- Validated learning adopted as modus operandi drastically changes consortia’s attitude towards failure. In fact, failure becomes an expected norm rather than an exception or an incident, hence turning into an unparalleled chance to continually distill lessons learnt.
A noticeable strength of JLM that came to light in the FREME experience has to do with not requiring a quantum leap in terms of ‘innovator toolkit’: in fact, consortia – especially partners at the helm of exploitation-related activities – can rely on the portfolio of tools that they are already accustomed with, such as Value Proposition Canvas, Business Model Canvas, tools for value ecosystem design (e.g., Board of Innovation, e3-value), competitive analysis tools taught in business schools (e.g., Porter’s Five Forces analysis, VRIN, SWOT) and financial metrics for investment analysis (e.g., NPV, IRR, PBP, ROI).
This brings to the fore the essence of the 'journey from lab to market’ mindset: it does not bring tectonic changes to the single tools adopted by consortia but rather – resorting to a culinary analogy – it intends to enhance the recipe without necessarily varying the ingredients. All this with a clear goal, that is turbocharging consortia’s ability of getting research results to market.
In practical terms, this means making the leap from procedure-based management of EU-funded project to outcome-driven (as market reactions act as guiding light in view of the customer development approach) and evidence-based thinking (as the lean startup mindset is grounded on running experiments that allow to systematically test potentially each element of a business line).
With FREME a similar approach has proved to be able to turn a EU-funded project into a powerful springboard allowing companies - spanning the gamut from startups to large enterprises - to embark on a path of market expansion, brand recognition and financial growth.
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