Inside-Out and Outside-In: New Vistas for Taiwan Industrial-Academia Collaborations for Economic Development?

Academician
Engene Wong, Director Wang from NSC, Director Ni from the Ministry of
Education, distinguished colleagues from eight research intensive
universities in Taiwan, from Taipei to Kaohsiung, ladies and gentlemen,
on behalf of NCKU, I want to express my deep gratitude to Eugene for
inviting NCKU to have a place today to talk about this enormously
important subject for Taiwan in particular, and Asia Pacific in
general.  It is important both intellectually and economically!  Also
if economics can impact politics, than politically as well!

Eugene, while I know the word "germination," or 萌芽, I have never seen
it used in such a poetic manner in describing the discovering and
nurturing of epoch changing technology which may be lurking in Taiwan,
especially in universities. So, congratulations for portraying this
concept in such a succinct manner!

As an administrator of a research intensive university in Taiwan, I
would be remiss in my duty if I did not give a few words of propaganda
about NCKU, although I am sure all of you in the audience know quite a
bit about it, maybe even more than me since I merely parachuted into
Tainan some nine months ago.

Something about NCKU

NCKU has nine colleges and around 50 institutes.

There are two points I like to raise regarding my NCKU "propaganda",
and both have profound implications on our "intellectual output," which
of course are directly correlated to Eugene's germination concept!

First, NCKU has around 21,000 students, half of them are graduate
students.  Since we only have 1,250 faculty members, this means that on
the average, each faculty will have to support financially and
intellectually some 8 graduate students. In fact, I have seen that
there are faculty members in some departments with over 20 graduate
students in his/her laboratories. Compare this with Kyoto University,
whose students' population is similar to NCKU, it has over 3000 faculty
members. Hence, it appears that the workload for faculty in NCKU, as
outstanding and as hardworking as they are, is undesirable
intellectually, if not physically.

Second, NCKU annual research dollars income from all sources is around
$80 million (US) dollars per annum. By adding the 5Y50B money into the
equation, also the fact that faculty members are paid 12 months and not
9 months annually and overhead rate is far lower than US universities,
this number could be as high as $100 million (US.)

Let me give you an interesting way to view this number.  Since I know
Texas well, I can say that (not including the medical universities such
as M. D. Anderson Cancer Center since they play in a completely
different sandbox,) only University of Texas at Austin, Texas A and M
University have significantly higher research dollars per annum than
NCKU. In population size, these two universities are also significantly
larger.  Other research universities, such as University of Houston,
Texas Tech University, and Rice University are roughly the same as
NCKU. Actually, if one recalculates the number by factoring in buying
power, I suspect NCKU's number will be a lot bigger. 

What this is implicating to us is that the research output of Taiwan's
research intensive universities are approaching or surpassing many
research intensive State universities in the US. Therefore, from this
view point, I think it is very exciting to note that it is not beyond
the realm of possibility that there are truly epoch changing
technologies that are lurking in the corridors of Taiwan universities,
waiting to be "germinate!" This makes the issue raised by Eugene in
this workshop even more exciting.

So, what is the mission of NCKU?  Well, from every corner of the
university, from engineering to medicine to humanities to social
science, I heard that it is consistent with "To be the economic and
intellectual engine of southern Taiwan in particular, Taiwan and Asia
Pacific in general!"

This sounds awfully good.  Can we put it into practice?  We can only if
we can stimulate economic and intellectual development synergistically.

So let's get into today's subject.

A good friend of mine who is an extremely successful entrepreneur once told me in no uncertain terms that "A business is there to make money, ethically!"  There is no "ifs" or "buts" after this statement, he said.

What are the fundamental ingredients of creating a business?  They have to have, in my opinion:

• a good idea;
• a burning desire to do business;
• a way to obtain business finance;
• a way to turn a prototype into products, which is a euphemism for manufacturing;

 

• a way to sell products successfully, which is a euphemism for marketing;

Now let's examine inside-out from the business ingredients I mentioned above and see how it works.

With this in mind, I propose that there are two ways where academia can
interact with business, or what in Chinese is called 產學.

Inside-Out and Outside-In!

In all the talks of my colleagues today, the underlying philosophy is
inside-out.  This is when within the university, we find the best
possible "prototypes" created by faculty, students or what have you,
and then push it outside the university.  Now let's examine inside-out
from the business ingredients I mentioned above and see how it works.

• A good idea.  This is certainly not in short supply
  within the university.  After all, most research done inside the
  university are curiosity driven by smart people.
• A burning desire to do business.  On the average, this is
  a little less abundant inside a university. Generally speaking, we do
  not adequately trained and/or education our faculty and students to be
  highly entrepreneurially minded.
• A way to obtain business finance. This is even more
  difficult.  Finance for business is very different from obtaining
  research funding from the Science Research Council of Taiwan or
  National Science Foundation of the United States.  Here the
  conversation needs to be between faculty and venture capitalists,
  angels, investment bankers and so on. Bringing people of such different
  background together to have a meaningful conversation, or collaborate
  on business, is a highly unusual, if not unlikely scenario.
• A way to turn a prototype into products, which is a euphemism for manufacturing.  This
  is almost impossible inside the university.  I know of NO university
  that can manufacture anything in large and highly regularized manner,
  nor should they.  Therefore, seeking the right manufacturers is in
  itself a significant business enterprise.
• A way to sell products successfully, which is a euphemism for marketing.  Marketing
  takes on all forms.  While there are business or management schools
  within universities, to find expertise on a specific technology's
  market, and to promote the sales through a sophisticated marketing and
  sales channel, is not a simple task within a university.  Yet, without
  it, the products will simply "sit on the shelf," a most undesirable
  business scenario.

These difficulties have collectively been given a very ugly name, and
it is called the "Valley of Death!"  Few universities in the US were
able to overcome it without dispensing significant of it own scarce
resources and hiring outstanding professionals. The glaring successes
which are few and far in-between are Vitamin B-12 of the University of
Wisconsin and Gator-Raid of the University of Florida. Although I do
not have data at hand, I suspect that the situation in Taiwan is no
better, if not worse.

I should also mention that there is another issue which universities
"prototypes" need to consider.  That is it is the nature of academic
research that faculty tends to work alone, and therefore can create
only a prototype of reduced functionality, if not a single
functionality. However, often technological breakthroughs of today are
more in the form of "internet," where the "we are smarter than me"
concept of Keniche Ohmae is more applicable then of the form of
'semi-conductors," a profound and global economic transformation of
three scientists from Bell laboratories.  This means that it is more
likely than not that what is needed is a set of prototypes put
together, as in system integration, in order to have serious commercial
value. 

What about outside-in?  Well, we are very lucky to be in Taiwan because
the island is not large and now the West coast is connected by a bullet
train, and hence de facto even smaller than before. In addition, since
the technology transformation started in the 70's, a large number of
highly educated and highly trained technologists/entrepreneurs either
return to Taiwan or locally groomed. The island is not short of the
supply of people with entrepreneurial desire burning in their guts and
with good technological business instincts. These are what I refer to
as "outsiders."  They are not inside the university, but they usually
are swarming around the university.

Now let's examine outside-in from the business ingredients I mentioned above and see how it works.

• A good idea.  This is certainly not in short supply from the outsiders.  Without a good idea, they do not have a business.
• A burning desire to do business.  Ditto.
• A way to obtain business finance. For outsiders to
  survive in the outside, at least initially, they'd better know how to
  obtain business finance.  Or else, they do not have a business.
• A way to turn a prototype into products, which is a euphemism for manufacturing.  They must know how to do this.  Or else they do not have a business.
• A way to sell products successfully, which is a euphemism for marketing.  Marketing is fundamental to any business. It is the "soul" of business.  Without it, outsiders do not have a business.

It is clear that if we can create a platform for outsiders and insiders
to interact, i.e. by synergistically linking up outsides with insides,
I am convinced that we can go a much longer way for germination than
each doing it on its own.

Finance

Both inside-outers and outside-iners need finance. For inside-outers,
this sort of funding is fundamentally different from those they compete
for in Science Research Council in Taiwan or National Science
Foundation in US.  They are funding in the form of venture, angel,
investment bankers and so on.  The language deployed in negotiations to
gain access for this kind of funding is fundamentally different from
research funding. Most faculty and students inside the university lack
such training, if at all. For us to develop smoothly the "germination,"
I think universities need to be pro-active in training faculty to have
such skill-sets.

A few months ago, in order to try to comprehend the thinking process of
entrepreneurs housed in either NCKU's incubator or Southern Taiwan
Science Park incubator (under contract from MOFA, they are operated by
NCKU), the director of NCKU's incubator Professor Y. L. Lo, his team
and I had a three hour heart-to-heart meeting with this group of about
30 CEOs. 

My impressions of the meetings are as follows.

First, they are all highly sophisticated entrepreneurs.  They have solid grasp of their products and the marketability.

Second, they are all frustrated with the VC communities.  Perhaps the
most poignant comment made by one very bright CEO is that the Taiwan
VCs are highly "risk averse," and hence there is essentially no
opportunity for startups. I am not sure whether this would be an
accurate blanket description of Taiwan's VC communities, and I am
equally not sure whether US VCs, after the disastrous DOT.COM
era of the last decade of the 20th century is not equally "risk averse"
today.  Never the less, I suspect that at least in southern Taiwan, VCs
play little role in "kicking up an entrepreneurial storm."

Third, some of the CEOs appear to hope to, or rely on Taiwan's SBIR
from the Government. I told them that my gut feeling is that while one
should never dismiss such handouts from the Government, here or in the
US, I think it is nevertheless true that such funding is a little too
late and too slow.  Speed, I learned when I was in the industry, is one
of the important ingredients of business success.

Fourth, they want to find ways to work with universities beyond merely technological collaborations.

Intellectual Properties

After nine months in one of the research intensive universities in
Taiwan, and after discussions with many experts and faculty in
academia, corporate and major law firm, I think I am probably not too
far from the mark to say that IPs gut level understanding in
entrepreneurs are not ubiquitous.

When I started to learn about IPs about twelve years ago, I was so
impressed by two US senators, Senator Birch Bayh and Senator Bob Dole
who had the great foresight to release ALL IPs developed from research
in universities utilizing Federal government funding will be owned by
the universities. With one ACT, known as Bayh-Dole ACT, US universities
were transformed. 

Perhaps this Workshop is a good opportunity for us, as eight of the
research intensive universities in Taiwan, to begin working together to
raise the level of recognition of the importance of IPs in academia.

To this end, I believe that universities must maintain high degree of
flexibility in its treatment of IPs. For example, we must maintain very
flexible and pro-faculty in our license agreements with the inventors.
Also, I believe that all universities must have, if not already, robust
and forward looking university-wide Patent Committees.  These
committees must not be "pro-forma" committees, but one must have
significant components from legal as well, if possible, VCs.  It is
important to bring to the entire university that IPs, or patents, are
statements of "commercialization," not just another line in one's
resume, as in a publication.

I am so pleased that in NCKU we now have the following:

• With the direction from the President of the university, we now
  have created an SOP for establishing legal agreement between university
  and "clients,"
• We have developed a robust internal legal team with significant national and international IP expertise.

Obviously far more needs to be done but these are excellent first steps.

Credibility of Startups

About four years ago, I started to realize that besides funding,
marketing, manufacturing and so on, there is ONE intangible quality
that startups must have, and that is "credibility."  In hindsight, it
is obvious. 

The world of business is defined by one word and that is "competition."
If you are a small company, albeit a startup or just a small company,
and whether you like it or not, you will be competing with larger
companies. I have seen many such competitions.  One way to ensure that
such you have a fighting case is to develop a palpable credibility.
This takes on many forms and it is one area where universities can play
a very significant role.

The reason is university leaders are "public figures" and therefore
connections one develop in this capacity can be wide and deep.  By
carefully understanding the wide range of connectivity of society, one
can find ways to create "advisory boards" of startups which will have
incredible value from the "credibility" point of view.  I have seen
this worked more than once!  When it works, it can be very exciting
indeed. This to me is an excellent example of inside-out and outside-in
collaboration.

ETAP (Entrepreneurs Task Force for Asia Pacific)

Based on the above analysis, strong encouraged and supported by
President Michael Lai of NCKU, who has strong interest in promoting
globalization and collaborations between academia and industries,
Director Lo and I created the FIRST Entrepreneur Task Force for Asia
Pacific (ETAP) so that we can provide some of the issues raised above. 
Perhaps the most important realization is that to become globalized, we
need to have global impact of international VCs, people who run
corporations with international perspective, people who understanding
world and Taiwan IP issues, and last but not least, people who are from
the home front who can interact with the international community!

To this end, we now have the following members of the task force.

• Mike Devlin, a $600 million US VC known as Pharosfunds. 
  Mike is a world class VC, and a former highly successful investment
  banker of Goldman Sachs of New York City. Mike is also profoundly
  interested in Asia Pacific and has a good command of Mandarin and
  Cantonese.
• Olivia Cheng, a Tainan lady who is CEO of an extremely
  successful global medical device company. Ms. Cheng is also a former
  highly successful investment banker.
• Howard Cheng, a highly trans-Pacific visible IP lawyer who is partner of K. L. Gates, one of the world's largest law firms.
• Tai Chein, President of Southern Taiwan University (in
  Tainan,) a former CEO of Southern Taiwan Science Park and former Deputy
  Director of National Science Council.
• George Yen, a highly successful entrepreneur in Asia Pacific, especially in the two straits.

With such a proactive and highly qualified group of individuals,
together they possess enormous breath and depth in understanding and
promoting entrepreneurial spirit in southern Taiwan, my colleagues and
I are confident that they will play an enormous role in the economic
development of Taiwan and Asia Pacific in years to come.

Summary

From this discussion, I hope that the need to alter the culture and
stimulate entrepreneurial spirit within and outside of the university
is obvious to all!

A good friend of mine who was the president of a US university once
told me that it is fundamentally important to "create a glow around the
University and show palpable warmth towards entrepreneurs!"He said that
"unfortunately that universities always project as a "cold" place to
outsiders, and if we do not change this, this thing called
academia-industrial collaboration will only be a mirage."

Is this germination? Yes, but it's only the first step. A lot more work needs to be done!

Thank you very much for your attention.