Six ways for deep tech firms to improve their chance of success
Game-changing technologies offer huge benefits for society, but bringing them to market can be a long and arduous journey. New research suggests ways to overcome the barriers.
From finding a vaccination for COVID-19 to space tourism and wireless headphones; scientific breakthroughs have transformed our daily lives in recent decades. Hardly a week goes by without a story about another new wonder drug or ground-breaking technology on the horizon.
Yet, the reality is that the majority of these innovations will never reach the market, and those that do succeed could take decades to take off. So why do so many important technologies fail to live up to their promise?
Research suggests that innovative firms that move into overseas markets can quickly go from strength to strength because they benefit from a ‘virtuous circle’. By entering new markets, they acquire new knowledge which they use to enhance their products and further boost sales. However, the same doesn’t seem to hold true for some ‘deep tech’ firms.
Deep tech companies are based on 'new to world' scientific advances and high tech engineering innovation. They require lengthy research and development, and may take a long time to reach commercial application – which means they often require large investments to achieve commercial success.
One timely example of deep tech is the COVID-19 vaccine that The University of Queensland researchers are currently developing.
While there has been some surprise at the predicted time frame to have a vaccine to market, the average timeline to develop a vaccine is 10 to 15 years according to Professor Paul Young, who heads the vaccine development team.
Deep tech products are the game-changing innovations that drive society forward confirms Dr Alexandra Kriz, an expert in service innovation and international business at The University of Queensland (UQ) Business School. Her research focuses on challenges and setbacks that can hinder deep tech organisations, and how to overcome them.
"Deep tech companies are so different from others because they face far more obstacles," says Alexandra.
“Most companies with ‘new to world’ technologies often don’t have a product or service that is ready to sell – they are still under development,” she says.
“These deep tech startups aren’t targeting the market, they are creating the market. As they are pioneering new ground, they do not necessarily have suitable templates to follow and the risks are higher.
"They are not only facing market uncertainty because they cannot predict demand for their product, but also technological uncertainty as they don’t yet know what the final product might look like.”
“Trying to develop their product and expand internationally at the same time can create tensions and in extreme situations can result in a vicious circle, rather than a virtuous circle.”
In her research, Alexandra analysed deep tech businesses from the last 20 years, spun out of Australia’s national science agency, CSIRO, and carried out interviews with over 50 key stakeholders to support the analysis.
All the businesses in the study had important technologies, yet the ongoing challenges of the global commercialisation journey took some by surprise.
Alexandra and her colleagues have identified some common themes. Because of the high-level science involved, novel technologies can take a long time to develop – especially healthcare and biotech products – and extensive testing and regulatory approvals are required.
Some are so ahead of their time that the legal or regulatory framework may be inadequate. Similarly, novel innovations may challenge existing attitudes and customs. Companies may have to work with potential users to design a product that is more acceptable and appealing – for example, self-driving vehicles or innovative personal healthcare products.
As generic technologies can have many different applications, companies need to choose which ones to pursue, and managers may have conflicting ideas. The whole commercialisation process requires huge investment at every stage.
Investors may be required to bankroll the business for years, often supporting both the ongoing R&D and the international expansion at the same time. The uncertainty about both of these can create tensions which are further amplified by economic conditions and the threat of new competitors entering the market.
Not surprisingly, the journey for deep tech firms is volatile – progress is easily reversed, and a period of stability rarely lasts for long. Alexandra says firms face a ‘marathon journey’ with likely problems at every stage.
“Developing a new technology involves a series of problems to solve, which continue even once it is making early sales. When one problem is solved, a fresh problem emerges," says Alexandra.
"Once the technology is successfully tested, it still needs to be turned into a reliable product.
"Due to the scale of technology they’re developing, deep tech firms confront many potential hurdles – failure at the trial stage, cost overruns, and a lack of demand for products that the market isn’t ready for. "
"But, if a viable product can be reached with a market, it changes the world! "
So, how can deep tech companies improve their chance of success in the face of these obstacles?
The research suggests a number of lessons
Dr Alexandra Kriz, a service innovation and international business researcher at The University of Queensland Business School, discussing her top tips for deep tech companies to succeed.
Make the most of your network – understand what support is available, such as trade and investment bodies, and learn from the experience of others to avoid ‘reinventing the wheel’.
With spinout companies (those that are created by an existing organisation), the parent institution will often signpost them to the right agencies, while non-executive directors who know the industry and have ‘been there, done that’ in other spinouts can also be invaluable.
Don’t put all your eggs in one basket – it can be a good idea to pursue a range of different applications. If a firm commits to just one path, it may close off other options as it could be too costly to switch at a later stage.
However, diversification requires investment and potentially slower progress. Managers need to scenario plan and consider risks and opportunities when walking the tightrope on whether to focus on one application or develop a range of them.
Understand the market – scan the environment for opportunities and threats, and be aware of emerging trends. Interview potential consumers and understand how they are thinking. This will help inform your decisions on which direction to take and increase your chance of success.
Consider the value of applying human-centred design to understand consumers and to generate lateral solutions.
Get the public on board – to achieve success, you will need to have buy-in from the public, which may require a shift in attitudes. Try to find early adopters and win the backing of influencers – ideally high-profile figures with a reputation for doing the right thing but who will not expect a big fee in return! Early traction can have a significant impact.
Look for synergies – try to develop applications in areas where you already have some experience or knowledge. Starting from scratch in an entirely new area is much more difficult and will require more time and investment to gain traction.
Hire the right people – bringing a product to market requires a range of highly specialist skills. Scientists need to be complemented by finance, management and marketing specialists who will ideally understand the particular challenges deep tech firms face and be comfortable with the level of risk.
Having the right people in place can help manage some of the tensions between technical and market uncertainties and provide a competitive edge.
“In Australia, we are fortunate to have an organisation like the CSIRO that has generated extraordinary innovations like WiFi, plastic banknotes and a Hendra virus vaccine,” says Alexandra.
“As this research shows, deep technologies need institutional and policy support that accommodates their uncertain and lengthy commercialisation journey."
"Networks, market and industry synergies, and consideration of diversification pros and cons can all help improve their chance of success – and we must never forget the importance of having the right people in pursuing ambitious internationalisation goals."
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