Tag Archives: commercialisation

Drawing Financial Reports

My boss made me present financial reports as drawings.

Along time ago when I wore an accountants hat, I used to work for a multinational engineering group that had a lot of operations in Asia. My boss was a Filipino who lived in the US, had been a managing partner of Arthur Anderson and was on the board of an airline. You could say that he was a global finance guy.

On occasion he would request a presentation on an area of our operations. My normal response was to scurry around for a week building spreadsheets of our Profit & Loss and Balance Sheet with some lovely graphs. His response was to ask me to draw where the money came from and where it was going.

Having studied Accounting, not Art, I used to find this approach very confrontational, but after a while I started to understand what he was getting at.

His point was:

  • In a multi-jurisdiction environment, issues around accounting policies and taxation can cloud understanding of basic operations.
  • The concept of profit in itself is vague (Operational, NPAT, EBIT, EBITDA etc, etc).
  • The differences between cash and accrual accounting can hide all manner of sins.
  • Policies underly revenue, expenses, liabilities and assets, not necessarily reality.
  • Cashflow is the ultimate metric for measuring performance, everything else is secondary.
  • And finally, if you can’t draw out where the cash is coming from, and going to, you don’t understand what you are talking about.

I bring all this up because I had a chat with an IP commercialisation guy the other week and asked him how he was going. Fabulous he said. He had done a huge number of deals over the last 4 years and had created some equity positions in some really interesting businesses.

The fact that he thought he was doing a fabulous job, put never mentioned revenue immediately caught my attention, but in a slightly irritated way.

I said “So you think you are successful?”.

So he said “Well it depends how you measure success”.

I said “Well lets say at the end of the day, its all got to hit your bank account as cash, so how much cash have you actually been responsible for putting into your employers bank account”.

He said in a very small voice “Well none actually”.

Now I’m not saying that profits and deal making isn’t important, I’m just saying beware vanity metrics!

People in the Ecosystem

In recent years I have met with vast numbers of people that didn’t even come close to living up to how they represented themselves.  This has led to a desire for me (see how I’m avoiding angry words) to share some of my more bitter definitions of people in the entrepreneurship ecosystem.   Now these don’t apply to everyone; but because I am now bitter and twisted, I tend to take the position of “Your guilty until you prove otherwise”.

Warning – do not be impressed by these people, until they have proved themselves.

Entrepreneur
A person who says “I am an Entrepreneur” regardless of their situation.  I have met Entrepreneurs who were full time students, full time employees or even, as I discovered recently,  unemployed and looking for a job.

Founder
A person who started a business because they were consumed with the irrational belief that they can simply will the universe to change to how they want it to be.   And if It doesn’t change, they pretend it did.

Co-Founder
Someone who was in the room when the decision to start the venture was made.

Founding Employee
A person who was desperate for a job and had no ability to asses risk.

Serial Entrepreneur
Someone who has difficulty learning from their mistakes, but finds it easier to start a company than get themselves job.

Company Director
Someone who just spent $600 to register a Pty Ltd company with $2 of paid up capital.

Independent Director
Someone who knows absolutely nothing about the industry and very little about the company, but looks good on paper and is happy to fly to exotic locations to receive briefings.

Non-Executive Director
Someone who is not committed to the business and clearly not adding enough value to get paid more than a graduate salary, however they are prepared to fly to exotic locations for board meetings.

Professional Non-Executive Director
Someone who likes to hedge their bets rather than commit to one company and is committed to getting Chairman’s lounge membership because they spend so much time on a plane.

Consultant
Someone who is convinced that their ideas are first class, but would not risk their own money to actually validate them “in real life”.

Mentor
Someone with grey hair who likes to answer questions with questions (and isn’t a German psychiatrist).

Expert
One of the 22% of working Australians that completed a University degree.

Commercialisation Expert
A public servant who went to University and completed an MBA.

I pass this on in the hope that you will pause and reflect, before falling into the trap of being instantly impressed.  And my humble disclosure – I have used at least 5 of these labels to describe myself at various times.

5 reasons why commercialisation isn’t business

I’m feeling a bit feisty, so I thought I might bring up the topic of commercialisation.

I have just finished up directing an interesting all day forum for the InnovationXchange on the intersection of food and pharmaceuticals.  During the conference, I found out that we (Australian Scientists) now have the capability to treat a number of  diseases by delivering pharmaceuticals in food.  A specific example given was the clear opportunity to alter the proteins in some cereal crops so that we can have “non-toxic gluten” cereal crops (easily do-able).  People suffering from  celiac disease can then have a sausage in bread and a beer at your bbq, without paying for it a couple of hours later.  People on gluten free diets currently spend around an extra $1,000 a year on their diet and there are 600,000 of them in Australia alone.  Nice opportunity for the guys with the IP !

Anyway, whilst talking to a huge variety of people as I was putting together the forum, I found I ran into a large number of commercialisation experts.  Most of them weren’t coming though as they were off to a biotech function in the US.  I wasn’t really stressed by this (other than from a revenue point of view) as commercialisation people tend to make me feel quite uncomfortable.

Commercialisation is a reasonably new word and every Research Institution now has some “commercialisation people” as employees.  The commercialisation people are thought to be more business focussed than their research colleagues.  The plan is that the Commercialisation people will licence their institutions intellectual property to a multinational, or sell it direct to customers.  Apparently millions will be made.

As I mentioned though, these people tend to make me feel quite uncomfortable, and here’s 5 reasons why:

1.    People whom deal in commercialisation almost always deal in what I call “supply push” innovation.  Basically trying to create a revenue stream from new intellectual property that has been created.  The problem here that I see is that although supply push type innovations may have potential to generate extraordinary returns, they are unlikely to.  They are a solution looking for a problem.  The converse of this is “demand pull” innovation,  new intellectual property created to solve existing customer needs.  This type of innovation is guaranteed to generate revenues.  Note that commercialisation experts don’t bring these solutions to market, its marketers and salespeople.  Which brings me to………….

2.    I feel that the concept of “commercialisation” is an abstraction from real business.  Although we don’t like to talk about it, every business has the same model, we all generate and harvest customers; just our specific executions are different.  So at the end of the day if your not talking about customers and selling, then your not in business.  Doesn’t matter whether your using fancy multisylabic words, spending a small fortune on IP lawyers, travelling the world and meeting complex KPI’s (Key Performance Indicators).  Your not in business.

3.    People involved in commercialisation appear to have a very limited world view.  They tend to disregard businesses that don’t have unique IP that’s being managed.  They appear to have no gut feel on the importance of brand, business models, distribution networks and unique selling propositions.  Every successful business that doesn’t have unique IP is seen as an aberration (note to car and petrol companies, you’ve apparently got it wrong !)  Having a science degree and an MBA, simply means you have a science degree and an MBA.  It doesn’t mean you are hungry or can negotiate worth a cracker. Which brings me to………….

4.    I have yet to meet one that has serious revenues under their belt.  They always seem to be in current negotiations with a major multinational, or have closed a deal but revenues haven’t actually started to fall.

5.    Its usually my taxes paying for these people.  (I don’t think I need to expand on this further).

So next time a public servant with an MBA tells you he is a commercialisation expert, smile and move on quietly.  Or if your looking for some action, ask him or her, how much revenue they have booked this year.  And for those of you I have pissed of by this blog, the solution is simple.  Get an entrepreneur to review your opportunities and some real salespeople to sell your IP!